Summary Suits are contemplated under Order XXXVII (Order 37) of Civil Procedure Code of 1908, a very powerful and expeditious remedy (in theory) provided under the law for recovering moneys, which are routinely trapped in commercial transactions.
The very purpose of enacting Summary Suits is to give strength to commerce and industry by inspiring confidence in commercial population that their money claims would be expeditiously decided and their claims will not hang on for years blocking their money for a long period. The Summary procedure is a powerful weapon in the hands of Court to shut out frivolous defenses which are raised in commercial causes with a view to prolong the litigation.
Summary Suits are maintainable upon negotiable instruments, like bills of exchange, including cheques, hundies and promissory notes; and are also maintainable in cases where the person seeks to recover a debt or liquidated demand in money, arising out of a (a) written contract (Includes commercial Invoices), (b) under an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt, (c) upon a guarantee, where the claim against the principal is in respect of a debt or liquidated demand only.
As stated above, Summary Suits can be filed based on dishonour of cheques. It may further be observed that Summary Suits based on negotiable instruments like dishonoured cheques, stands on a higher footing than that of Summary Suits based on written contracts, etc. This is because of the statutory mandate contained u/ss 118 and 139 of the Negotiable Instruments Act, 1881.
The remarkable observations made by Hon’ble Bombay High Court in this behalf deserves to be reproduced. AIR 2013 CC 1178 (Bom)
What needs to be emphasized is that presumption in respect of a dishonoured cheque places a higher burden on the defendant to elucidate the defence than the burden which is cast on a defendant where the suit is filed on the basis of ordinary instruments.
The Court while exercising the discretion to grant leave or otherwise to the defendant in such cases, cannot be oblivious of the legislative intent to place the promise made through a cheque on a higher pedestal than the promise made through an ordinary instrument. This is not to state that moment a Summary Suit is lodged based on a dishonoured cheque, it must be decreed without anything more. What needs to be emphasised is that the fact that there is a statutory presumption attached to the dishonoured cheque will constitute an important ingredient while considering the question whether leave to defend should be granted in cases of dishonoured cheques and the Court must scrutinise the defence strictly. The object of the summary procedure is ultimately to see that the defendant does not needlessly prolong the litigation by creating untenable, frivolous and casual defences so as to deprive the plaintiff of the monies due to him.
The Hon’ble Apex Court in a case (AIR 1954 SC 429) before it have laid down the proposition that Payment by cheque is considered in law as Payment received, but obstructed by dishonourment. However, in cases where post dated cheque was issued and later dishonoured on presentation, the aforesaid proposition that “Cheque is payment”, may not apply. [AIR 1967 SC 1118]. At the same time, the Author is of view that the proposition “Cheque is payment” may safely be applied in all cases, where the date on which the cheque was given, the debt had accrued.
The Full Bench of Hon’ble Gujrat High Court in a case before it [AIR 2000 Guj 261] have held that the payment by cheque, which is dishonoured, would amount to acknowledgement of a debt and a liability.
In Summary proceedings, evidences are not led, and the Court either passes the judgment, or convert the proceedings into a regular Suit, either by making a conditional order of deposit of money or even without depositing of any money in the Court, depending upon the nature of defense raised by the Defendant.
Let us quickly look at the Summary procedure under Commercial Summary Suits. (1) Compulsory Mediation u/s 12A of the Commercial Courts Act, 2015 (not applicable if any Interim Relief is applied for). (2) Institution / Filing of Summary Suit alongwith Draft Summons for issuance of sealed Summons (3) Service (hand delivery or by courier / speed post / Regd post) of Suit proceedings upon Defendants (4) Applying for Ad-Interim / Interim Reliefs, if any, and filing Affidavit of service, [O.38] (5) Service of Summons through Court (6) Filing of Appearance by Defendants within 10 days from the date of receipt of Summons [O.37 R.3] (7) If no Appearance filed, applying for Ex-parte decree, tendering original Summons duly served upon Defendants [O.37 R2(3)] (8) If appearance is filed, then, Filing Summons for Judgment [O.37 R.3(4)] (9) Defendants answering the case of the Plaintiff, and raising his defense, if any [O.37 R.3(5)] (10) Rejoinder, if any of the Plaintiffs to the defense raised (11) Judgment.
If the defendant has not applied for leave to defend within 10 days, or if he has applied for and is refused the plaintiff shall be entitled to judgment forthwith;. [O.37 R.3(6)(a)]. The Court may, for sufficient cause shown by the defendant, excuse the delay of the defendant in entering an appearance or in applying for leave to defend the suit. [O.37 R.3(7)]
In a situation where the Defendants has file their appearance and so their defense, the Courts have to examine the genuineness of the defense. If the Court is satisfied that the defendant has no defense, or the defenses raised are patently frivolous, the Court is entitled to pass judgment and decree forthwith, without any trial; and in cases where the defense although is not inspiring, but has some likelihood of succeeding in the trial, the Court may call upon the defendant to deposit the claim amount in the court and then go for regular trial; and in cases where the defendant raises a good and reasonable defense, the Court would convert the Summary proceeding into a regular Suit.
Where the Court is “satisfied” that the facts disclosed by the defendant do not indicate that he has a substantial defense to raise or that the defence intended to be put up by the defendant is frivolous or vexatious, the Leave to defend may be refused, and the Plaintiff shall be entitled for the decree; [O.37 R.(Proviso to R.5)
Where a part of the Claim amount is admitted by the defendant, leave to defend the suit shall not be granted unless the amount so admitted to be due is deposited by the defendant in Court. [O.37 R.(2nd Proviso to R.5)]
If the defendant is permitted to defend as to the whole or any part of the claim, the Court may direct him to give such security and within such time as may be fixed by the Court or Judge and that, on failure to give such security within the time specified by the Court or to carry out such other directions as may have been given by the Court, the plaintiff shall be entitled to judgment forthwith. [O.37 R.3(6)(b)]
Therefore, whilst evaluating the defense, the Courts take into consideration the factum of issuance of cheque, and the statutory presumption attached with such issuance of cheque. [AIR 2010 SC 2885] At this juncture, the proposition of law, that (a) issuance of cheque is an acknowledgment of liability; and (b) issuance of cheque is payment effected, enunciated hereinabove, comes into play.
In a case before it (AIR 2009 Raj 7), the Hon’ble Rajasthan High Court have held that bare defense that Defendant did not executed subject negotiable instrument, is no defense.
One of the means to ascertain the bonafides of the contentions of the Defendants is to examine its conduct at the time of the concerned transaction and the period thereafter. The defense should not be in the nature of afterthought, i.e. a contention which has suddenly emerged after the filing of the Suit, and which the Defendants never took, which it should have taken at the accrued point of time. Further, the test “Whether defense raises a triable issue” may also be employed. The triable Issue arises when the Court frames an Issue based on plea and the supporting evidence placed on record by the adversary. Therefore, if a plea is raised and evidences are placed on record, which inspires credibility, the defense may be considered as genuine. However, if bare plea is raised without supporting evidence, the defense may be considered as frivolous. The Ruling of Hon’ble Apex Court in the case of Madhusudan Gordhandad and Co. versus Madhu Woolens Industries Pvt Ltd (AIR 1971 SC 2600), may be perused in this behalf.
In a recent Judgment (AIR 2016 SC 5321), the Hon’ble Apex Court, whilst taking into consideration earlier rulings in this behalf, laid down the guiding principles to be followed by Courts, whilst evaluating the defense. The brilliant Judgment of Hon’ble Delhi High Court [154 (2008) DLT 80] in this behalf may also be studied.
Summary Suits are not maintainable in every Civil Courts. They are maintainable in High Courts exercising original jurisdiction, and in City Civil Courts and in other district Courts which are duly authorized in that behalf.
It must also be bear in mind that where parties have provided for resolution of their dispute through Arbitration in their Invoices, or otherwise, then Summary Suits, or any other Suits, are not maintainable. Since the dawn of Commercial Suits in the year 2015, the Summary Suits may be filed as Commercial Summary Suits, depending upon the nature of dispute and the Claim amount.
Sandeep
Jalan
Advocate
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