Muhammad Nawaz Abbasi, J.--This direct appeal under Article 185(2) of the Constitution of Islamic Republic of Pakistan, 1973, has been preferred against the judgment dated 9.3.2004 passed by a learned Division Bench of the Lahore High Court, Lahore, in RFA No, 370 of 2003 arising out of a suit under Order XXXVII CPC.
2. The parties being engaged in the business of rice, entered into an agreement under which the appellants purchased rice of the value of Rs, 18,49,500/- from the respondent and made payment through Cheque Bearing No, 51868596 for sum of Rs, 18,49,500 to be drawn at Habib Bank Limited Kamonke Branch, Gujranwala on 30.11.2000. The respondents for encashment of the cheque, presented it to the bank on the relevant date which was returned with the remarks "refer to drawer".
The respondents on the basis of dishonoured cheque, filed a suit against the appellants under Order XXXVII CPC for recovery of Rs, 18,49,500/-, the price of rice, with interest and profit. The appellants while appearing in Court, sought leave to appear and defend the suit inter alia on the following grounds:--
(i) The appellants being owners of Faisal Rice Mills, Kamonke were engaged in the business of rice and they having pledged 2300 bags of rice and Godown of Mills with the Habib Bank Limited, Kamonkey Branch, Gujranwala, obtained a loan of Rs, 23,00,000/- from the Bank and handed over the possession of the Mills to the Bank. The record consisting upon the accounts books and other papers, including the cheque books lying in the mills was in the custody of concerned Bank officials, who in connivance with Shahid Mirza one of the plaintiffs, committed mischief and forged the dishonored cheque from the cheque book of the appellants;
(ii) The rice stock was in the custody of the bank and there being no proof of the existence of the alleged transaction of purchase of rice, the respondent had no genuine claim against the appellants; (iii)The suit was not maintainable for want of fulfillment of the requirement of Section 9(3) of Financial Institutions (Recovery of Finances) Ordinance, 2001.
3. The learned Additional District Judge, Gujranwala who was seized of the matter vide order dated 12.12.2000, granted conditional leave to the appellants to defend the suit subject to the furnishing of bank guarantee equal to the claim of respondents, amounting to Rs, 18,49,500/- to be furnished within a fortnight. In consequence to the failure of the appellants to fulfill the condition of furnishing bank guarantee, the learned trial judge vide judgment dated 6.3.2003 struck off their defence and passed the decree in the suit. The appellants being aggrieved of the judgment and decree passed in the suit, preferred an appeal in the Lahore High Court, Lahore and a learned Division Bench by setting aside the decree to the extent of amount of interest modified the same for recovery of Rs, 18,49,500 and dismissed the appeal.
4. The learned counsel for the appellants has raised the following contentions in support of this appeal:--
(a) The learned trial Court having come to the conclusion that substantial questions of law and facts were raised in the application for grant of leave to appear and defend the suit, was under a legal obligation to grant unconditional leave to defend the suit;
(b) There is ample case law in support of the proposition that if the defendant has arguable case and plausible defence, the unconditional leave is granted as of rule and thus the imposition of the condition of furnishing the bank guarantee was unreasonable;
(c) The learned Judges in the High Court in utter disregard to the law laid down by this Court on the subject held that the order of grant of conditional leave was passed by the trial Court in proper exercise of discretion; (d)The case of the respondent was that he entered into the alleged transaction of purchase of rice with the firm, of which the appellants, with others, were partners, therefore, the suit only against the appellants would be bad for non-joinder of necessary parties and consequently, the decree would not be executable;
(e) The foundation of the claim of respondent was agreement of purchase of rice with the appellants and without the proof of the existence of such an agreement, through the evidence, the dishonoured cheque alone would not--be- the sufficient evidence to establish the genuineness of the claim for passing the decree and in any case without fulfilling the mandatory requirements of Section 9(3) of Financial Institutions (Recovery of Loans) Ordinance, 2001, the suit was not entertainable.
5. The learned counsel appearing on behalf of Respondent No, 1, on the other hand, has vehemently argued that notwithstanding the objection regarding the existence of an agreement of purchase of rice, the dishonoured cheque would evidently be t, strong proof of genuineness of the claim of respondents particularly when the appellants in rebuttal, except the oral assertion have not been able to bring on record any other evidence to challenge the genuineness of the claim and suggest that their defence was plausible. The learned counsel added that the respondent has also lodged a complaint under Section 498-F PPC against the appellants for fixing their criminal liability in the matter.
6. The essential questions for determination in the present appeal are firstly as to whether in the facts and circumstances of the case, the order of granting conditional leave was passed by the trial Court in improper exercise of discretion. Secondly the non-compliance of the order of furnishing bank guarantee was not intentional and willful, rather it was due to the lack of communication of the appellants with their counsel who represented them before the trial Court and in consequence thereto they neither could arrange the bank guarantee nor approach the trial Court for modification of order or for grant of further time to enable them to make compliance of the order and the learned trial Judge, without providing them an opportunity to explain their position, straightaway passed the decree in the suit and thirdly, whether the learned trial judge having observed that substantial questions of law and facts were raised in the application for grant of leave to appear and defend the suit for the decision of which recording of the evidence was necessary, was under a legal obligation to grant unconditional leave.
7. The fact regarding the issue of Cheque Bearing No, 51868596 for a sum of Rs, 18,49,500/- from the cheque book of the appellants to be drawn at Habib Bank Limited, Kamonke Branch, Gujranwala, and the return of cheque by the bank, on it presentation with the remarks "refer to drawer", is not disputed. The disputed agreement dated 30.6.2000 relied upon by the respondent containing full detail of the transaction, is available on record. The suit was filed on the basis of dishonoured cheque against the appellants who having challenged the genuineness of the claim of respondents through oral assertion, denied their legality. This is difficult for the Court to give verdict in a case involving factual controversy without recording the evidence but in the suits under Order XXXVII CPC, the Court may without grant of leave to defend the suit, if is satisfied about the genuineness of the claim of plaintiff, pass a decree in the suit. The governing factor to consider the question of grant of conditional or unconditional leave is the quality of defence and the determination of question of quality and 'plausibility of defence always depends on the ground's taken and material placed before the Court in support of the application for grant of permission to appear and defend the suit. In absence of plausible defence, the Court may not grant conditional or unconditional leave and may pass the decree in the suit in exercise of powers under Rule 2(2) read with Rule 3 of Order XXXVII CPC. In case of grant of conditional leave if the defendant fails to fulfill the condition and the Court is satisfied that default was not willful and intentional, may condone the lapse or extend the time for fulfilling the condition but if no sufficient cause is shown for default, the Court may pass the decree in the suit. The grant of conditional or unconditional leave having direct nexus with the plausibility of defence, the ultimate success or failure in the suit is not the consideration for refusal or grant of leave, rather the consideration is that the grounds taken in the application for grant of permission to defend the suit are plausible and defendant has arguable case but there is no rule that if the defence is plausible, the defendant must be granted unconditional leave. If the Court forms , an opinion that the defendant has a good or plausible answer to the claim of the plaintiff, it may grant unconditional leave but if the defence is not of good standard, the Court may refuse unconditional leave. However, if the Court in the light of the pleadings of the parties, considers that it is not possible to ascertain the correct factual position qua the stand of parties, may grant unconditional leave but this is not the sole criteria to determine the question of grant of conditional or unconditional leave. The plausibility of the defence, is considered sufficient ground for grant of leave to defend the suit but it does not create a right of grant of unconditional leave which is granted only in a case in which there is sufficient substance in the defence and if the defence is based only on oral allegations of false claim, the Court may not grant even conditional leave to defend the suit. The plaintiff in the present case filed a suit under Order XXXVII CPC on the bags eta dishonoured cheque and the defendants while denying their signatures on the cheque and the liability of payment, pleaded that 'cheque was fabricated.
The learned trial Judge, having considered the matter, exercised the discretion in favour of grant of conditional leave which was upheld by the High Court in appeal with the observation that passing of the decree was legal consequence of the failure of appellants to fulfill the terms of leave granting order. The learned trial Judge in the light of the facts of the case deemed it proper to grant the conditional leave and in the given facts, no exception could be taken to the use of discretion in such manner. In law and common Sense, the discretion is discerning between wrong and right and power to act at discretion is bound by the rule of reasons which must be guided by law and must not be used in an arbitrary vogue and fanciful manner, rather it should be honest, legal and in the spirit of statute. In judicial matters, the exercise of discretion must be based on good and substantial-reason and we having examined the matter from this angle, have not been able to find out any defect in the exercise of discretion by the trial Court in the present case and consequently, hold that grant of-conditional leave was not against the law and justice.
8. The conditional grant of leave in a suit under Order XXXVII CPC is not questionable if the order was passed in exercise of discretionary jurisdiction providing an opportunity of hearing to the defendant but if the order was passed without hearing the defendants, it would not be a legal order. In the present case the order of grant of conditional leave was passed after providing full- opportunity of hearing to the appellants, who without showing good defence pleaded for grant of unconditional leave as of rule. We are afraitt the appellants instead of offering a reasonable explanation for not fulfilling the condition of furnishing bank guarantee in terms of the order of the Court or seeking extension in time from the Court for compliance of the order, attempted- to suggest that the claim of the respondents was based on forged cheque. The defence of the appellant evidently being not of good standard, would not be considered plausible for grant of unconditional leave. This is noticeable that appellants have not questioned the genuineness of the claim of respondents on a convicting ground and the learned counsel for the appellants also has not been able to satisfy us that the defence plea of the appellants was plausible and the grounds take in support thereof were strong enough for grant of unconditional leave. The main appeal is not fixed for today and only the CMA was fixed for hearing. However, learned counsel for the appellant, having argued the case on merit on asking the Court stated that he has nothing to add in his argument in main appeal which can be disposed of alongwith the miscellaneous application. The learned counsel for the respondent has also no objection for the disposal of the main appeal. We having heard the learned counsel for the parties and perused the record take no exception to the judgment of High Court and maintain the decree passed by the trial Court in the suit.
9. For the reasons given above, we do not find any substance in this matter and consequently, the main appeal alongwith CMA, is dismissed with no order as to costs.