' In the respondent's suit under Order XXXVII, Rule 2 of the Civil Procedure Code, 1908 for recovery of Rs,20,80,000, the petitioner as defendant was granted leave to appear and defend the suit but subject to the term of "submission of surety bond equal to the disputed amount uptil 4-7-2003" per order dated 27-6-2003 of the learned additional District Judge Lahore.
2. Instead of submitting the requisite surety bond, the petitioner filed a review application dated 4- 7-2003 to seek deletion of the above condition/term from order dated 27-6-2003. The learned Additional District Judge by order dated 8-7-2003 dismissed the review application. Aggrieved therefrom, the petitioner has filed the present civil revision on 18-7-2003.
3. The learned counsel for the petitioner referred to the cases of Agrofoster (Pvt.) Ltd. And 2 others v.
Judge Banking Court No,5, Karachi and another PLD 1999 Kar.398; Haji Abdul Wahid v. Hoechst Pakistan Limited and another 1993 CLC 1291; Ehsanul Haq Kiani v. Allied Bank of Pakistan, Karachi and 2 others 1984 SCM R 963 and Fine Textile Mills Ltd. Karachi v Haji Umar PLD 1963 SC 163 to contend that upon the findings of existence of a plausible and triable issue, the leave could not have been made subject to the condition of furnishing a security or surety bond. And that the refusal by the learned Additional District Judge to exercise the powers of review against illegal condition was a material irregularity and that the order was reviewable.
' Contrarily, the learned counsel for the respondent supported the impugned orders, also relying upon the case of Fine Textile Mills Ltd. To state that in an appropriate case, the condition could be imposed by the leave granting Court.
4. The question thus requiring determination in this case is as to whether upon finding on the basis of facts disclosed in the affidavit by the petitioner, of the existence of a plausible ground of defence and "prima facie material question for grant of leave to appear and defend the suit," was the learned trial Court legally competent under Rule 3 of Order XXXVII, C.P.C. To subject the leave to the term of submission of surety bond through the impugned order dated 27-6-2003.
5. Significantly both the learned counsel for the parties have placed reliance upon the principles settled by the Hon'ble Supreme Court of Pakistan in the case of Fine Textile Mills Ltd. Karachi v. Haji Umer PLD 1963 SC 163 holding that: "In a suit of this nature where the defendant discloses upon his affidavits facts which may constitute a plausible defence or even show that there is some substantial question of fact or law which needs to be tried or investigated into, then he is entitled to leave to defend. What is more is that even if the defence set up be vague or unsatisfactory or there be a doubt as to its genuineness, leave should not be refused altogether but the defendant should be put on terms either to furnish security or to deposit the amount claimed in Court.
' The principles upon which the provisions of Order XXXVII of the Code of Civil Procedure should be applied are not dissimilar to the principles which govern the exercise of the summary power of giving liberty to sigh final judgment in a suit filed by a specially endorsed writ of summons under Order XIV of the rules of the Supreme Court in England. One of such principles laid down by the Court of Appeal in the case of Kodak v. Alpha Film Corporation (1930) 2 KB 340 was that at the stage when leave to defend is sought "the Judge is not to try the action; he is to see that there is a bona fide allegation of a triable issue, which is not illusory; he need not be satisfied that the defence will succeed; it is enough that such a plausible defence is verified by affidavit."
' It was further observed in this case that "where the allegations are not merely illusory, leave to defend should be granted." The allegations in the affidavit filed on behalf of the petitioner in the present case are by no means illusory". But the Supreme Court further found that "since the conduct of the appellant is not entirely free from suspicion", leave was to be subject to the condition of deposit of the entire amount of Rs,90,000 in the Court.
6. The principles thus settled for the leave and the imposition of terms on the leave in this educative judgment were that:
(i) the Court should consider the facts disclosed in the affidavit filed by a defendant along with application for seeking leave to appear and defend the suit;
(ii) if such facts show a plausible defence or a substantial question of fact or law needing trial or investigation, the defendant will A be entitled to the leave to defend the suit;
(iii) if the defence set-up is vague or unsatisfactory or doubtful or ingenuine, leave should not be refused altogether but the applying defendant should be put on terms either to furnish security or to deposit the amount claimed; or
(iv) if the allegations in the affidavit are illusory or improbable not raising a triable issue as to the consideration for the Bill, leave can be refused by the Court.
7. While pronouncing the above principles, the Hon'ble Supreme Court of Pakistan reconsidered and revisited the facts disclosed in the affidavit seeking leave and it was held that the defendant in that case had failed to show connection of the appellant i,e, Fine Textile Mills Limited with that of defendant's partnership business with the Chairman of the appellant company where for triable issues were found to have been raised regarding absence of consideration for the cheques and employment of fraud or misrepresentation by the plaintiff in obtaining these cheques. Despite the finding of existence of a "plausible defence" or a "substantial question of fact or law" or a "triable issue" in the case, the Supreme Court subjected the grant of leave to the term of cash deposit in the Court by the appellant defendant in the suit for the reason that "conduct of the appellant is not entirely free from suspicion".
8. In the present case also, the learned trial Judge on finding of existence of a plausible case, granted leave to the petitioner but made the leave, under the circumstances of the case, subject to the submission of surety bond equal to the disputed amount.
' The petitioner did not comply with the term but sought review of the same. The learned Additional District Judge dismissed the review application in absence of any ground for review. It was also observed by the learned Additional District Judge that leave to appear and defend the suit shall be deemed to have been dismissed in absence of compliance with the term and the case was fixed for the respondent plaintiff's evidence. However, this civil revision was admitted for the regular hearing on 21-7-2003 and proceedings before the learned Additional District Judge were stayed.
9. Reliance of the learned counsel for the petitioner on the case of Ehsanul Haq Kiani v. Allied Bank of Pakistan Karachi 1984 SCM R 963 is inapt. In this case, the only observation made by the Supreme Court was that leave can be granted by the Court even unconditionally i,e, without the compulsion of placing terms on the leave. However, denial of leave to defend the suit and ex parte decree therein by the Special Judge (Banking) was upheld by the Supreme Court.
10. The case of Agrofoster (Pvt.) Ltd. And 2 others v. Judge Banking Court No,5. Karachi and another PLD 1999 Kar. 398 also does not reinforce the case of the petitioner. In this case, the provisions contained in section 10 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 and the equivalent provisions contained in section 7 of the repealed Ordinance of Banking Companies (Recovery of Loans) Ordinance, 1979 and section 6 of the Banking Tribunals Ordinance No,LVIII of 1984, were considered and interpreted. It was particularly held at page 401 of this judgment by an Hon'ble Division Bench of Sindh High Court Karachi that: "It is noted that the provisions of Order XXXVII, C.P:C. Did not apply to suit under section 6 of said Ordinance. It was not necessary for defendant to apply under Order XXXVII, C.P.C. For leave to appear and defend the suit."
' The case in hand was not a case under the special banking jurisdiction provided for in the Banking Statutes. It was a suit filed on the basis of dishonoured cheques under the special provisions of Order XXXVII of the Civil Procedure Code.
11. On the question of exercise of the discretion to grant leave to defend conditionally or unconditionally, an Hon'ble Division Bench of Sindh High Court Karachi in the case of Haji Abdul Wahid v. Hoechst Pakistan Limited and another 1993 CLC 1291 upon consideration of numerous precedents held that: "The principle on which leave to defend conditionally or unconditionally is granted, are well-settled.
The consensus of authorities is that so far the grant of leave conditionally or unconditionally is concerned, it is entirely within the discretion of the Court."
' Reference was made to the case of Haji Karim and another v. Zakir Abdullah 1973 SCM R 100 and to the case of Fine Textile Mills Ltd. PLD 1963 SC 163 to observe: "It will be seen that once the Court is satisfied that the defendant ought to be granted leave to appear and to defend the suit, it has discretion to grant leave unconditionally or subject to such terms unconditional leave might be granted where the defence appears to be incontrovertible.
Now, in the present case, although the allegations are made against the plaintiff and the manner in which he manipulated. The. Two promissory notes, yet signatures on these documents are not denied. Under section 118 of the Negotiable Instrument Act, 1881, there is an initial presumption that a negotiable instrument is made, drawn, accepted or endorsed for consideration. Although this presumption is a rebuttable presumption, yet the onus is on the person denying consideration to allege and prove the same. In the present state of the record, we are not at all able to say that the presumption attaching to the two promissory notes under section 118 aforesaid stands rebutted. In these circumstances, the High Court was clearly right in imposing terms on the two defendants."
' In unreported decision dated 29-7-1991 of the Hon'ble Supreme Court in Civil Appeals Nos.608-K.
609-K and 610-K of 1990 in National Security Insurance Company Ltd. And another v. Emirates Bank International and others, held as follows: "The consensus of authorities seems to be that where a plausible case has been made out leave must be granted but the question whether it should be granted conditionally or unconditionally is entirely within the discretion of the Court. One of the grounds on which discretion can be exercised in favour of granting unconditional leave is that the defence pleas raised are incontrovertible and unimpeachable. Where the defence plea raised does not come up to this standard the trial Court is competent to exercise discretion in requiring the defendant to furnish security. Therefore, in such cases when such order is challenged, the appellant must establish that the discretion exercised by the Court is perverse, illegal, devoid of any reasoning and principles of justice."
12. A very illuminating review of the case law and that of the applicable principles was made in the case of "Mian Rafique Saigol and another v. Bank of Credit and Commerce International (Overseas)
Ltd. And another" PLD 1996 SC 749. In this case, the appellants were aggrieved of the conditions of furnishing bank guarantees on the leave to defend. On reviewing the record the Hon'ble Supreme Court sustained the conditions of bank guarantees observing that it appeared that the negotiable instruments had been filled up on the basis of the admitted liability. The Court observed:-- "From the preceding discussion, it is quite clear that leave to defend in a suit instituted under Order XXXVII, C.P.C. Shall be granted by the Court where the facts disclosed by the defendant on affidavit make out a case of shifting of onus on plaintiff to prove consideration for the instrument, which is the basis of the suit. Leave may also be granted on any other ground or facts which the Court considers sufficient to support the application for grant of leave meaning thereby that refusal to grant leave to defend is a rare phenomena, confined to cases where no defence at all is disclosed by the defendant. Ordinarily, the Court would not decline leave to defend even in cases wherein defence appears to be very weak or a sham one, as in such cases leave may be granted by the Court conditionally. The next important question which arises for consideration is, when leave to defend may be granted by the Court unconditionally. Grant of conditional or unconditional leave, is undoubtedly a matter within the discretion of the Court which is to be exercised keeping in view the facts and circumstances of each case. It is, however, neither possible nor advisable to lay down any hard and fast rule in this behalf. From a careful analysis of the provisions of Order XXXVII, Rule, 3, C.P.C. And review of the case law, it appears that when the facts disclosed by the defendant in the affidavit filed in support of his application for grant of leave to defend, are such that it becomes necessary for the plaintiff to prove consideration of the instrument, which is the basis of the suit, leave to defend may be granted Unconditionally, provided the defence is found to be bona fide and the conduct of defendant is free from suspicion. Leave to defend may also be granted unconditionally, in cases where the execution of the negotiable instrument is denied by the defendant and from the material before the Court it is not possible for it to record a positive finding in this regard at the stage of consideration of the application for grant of leave to defend. Similarly, where the claim in the suit on its face appears to be prima facie time barred and there is no material before the Court to infer that the defendant has acknowledged his liability to pay the time-barred debt, leave to defend may be granted unconditionally. These instances are however, only illustrative and by no means exhaustive, as there may be other similar circumstances which may persuade the Court to grant leave to defend unconditionally. However, where the defence disclosed by the defendant in his affidavit filed in support of application for grant of leave to defend is found by the Court to be illusory or lacking bona fides or is intended to delay the proceedings or is based on allegation of vague and general nature relating to misrepresentation, fraud and coercion without any supporting material, leave may be granted on condition of either deposit of the amount claimed in the suit or on furnishing of security for the same or on such other terms and conditions which the Court may think fit."
' In this case, reference was also made to the following observations from the case of Messrs Ark Industrial Management Ltd. v. Messrs Habib Bank Ltd. PLD 1991 SC 976: "It would be improper to lay down a rule of thumb for the exercise of powers in matters of discretion vesting in a Court when even a statute has left it unfettered. In view of the Legislative history of these provisions the overall object envisaged by the legislature was to provide for expeditious disposal of litigation involving commercial transactions of a particular nature by a summary procedure so that the defendant does not have the means open to exploitation in the ordinary procedure for trial of suits to prolong the litigation and to prevent plaintiff from obtaining an early decision by raising untenable and frivolous defences.
13. In the case of Haji Sh. Muhammad Hussain & Co. Ltd. And 9 others v. 'City Bank N.A. Alfalah Building Lahore 1985 CLC. 2467, this Court observed that for forming a judgment: .... It is the quality of the defence and not the extent of the security which should be the governing factor in considering the question of leave."
' In this case, the Division Bench went through the record of the case and upheld the orders of the trial Court imposing the condition of pre-deposit of the entire suit amount as a condition for grant of leave to defend.
14. In the case of Messrs. National Security Insurance Co. v. Messrs Hoechst Pakistan Ltd. And others PLJ 1992 SC 261 = 1992 SCM R 718, the learned Additional District Judge had granted leave to defend but without referring to the pleas of the defence. On a revision petition, this order was reversed by this Court and the leave was made conditional upon deposit of the entire suit amount. On appeal, the Supreme Court upheld this order which adjudged that: "The rule with regard to imposition of conditions and grant of leave is that unconditional leave cannot be granted in cases where the possibility of the defence being a same one cannot be overlooked. On the same principle and indeed as an extension of it, I am of the opinion that the defendant would be entitled to unconditional leave whereas regards to the plaintiff's claim, such as being frivolous, vexatious or otherwise untenable cannot be ruled out."
15. The rule that thus emerges from the principles of law settled in the above precedents is that the facts and the questions as disclosed in the affidavit and application to seek leave to appear and defend the suit, form the basis for grant or refusal of the leave and/or to allow the leave upon terms or otherwise. Imposition of a term is the Court's discretion to be exercised judicially upon the facts of the case before it. Such exercise should of course not be arbitrary, perverse or unduly harsh so as to amount denial of the defence to a deserving defendant.
16. In the present case, the petitioner in his affidavit and the leave application filed under Rule 3 of Order XXXVII, C.P.C. Admitted that the parties had a business relationship whereunder the respondent plaintiff invested Rs,21,60,000 in cash with the petitioner defendant, though the respondent plaintiff in his plaint had pleaded to have loaned Rs,20,80,000 to the petitioner. The petitioner also admitted that the balance payable by him to the respondent plaintiff was Rs,20,80,000 and that cheques of Rs,20,80,000 were issued by him in favour of the respondent. The petitioner claimed issuance of these cheques "as security for the amount invested". The above cheques were admittedly dishonoured as not arranged for by the petitioner. And further that Shahid i,e, petitioner's son, issued more cheques of Rs,17,80,000 in favour of the respondent in order to satisfy respondent's business creditors.
' Execution, issuance and the dishonouring of the cheques thus ceased to be the litigated questions in the present case upon admission of the petitioner.
17. The learned trial Court as such reproducing the entire defence story of the petitioner in the impugned order concluded that the petitioner's defence deserved a trial and granted leave conditionally upon the furnishing of a surety bond for the suit amount. The learned trial Judge thus exercised discretion to impose a term by his evaluation of the case circumstances.
18. Examining the record to assess whether exercise of discretion of subjecting the leave to a condition by the learned Additional district Judge was improper or perverse or arbitrary, I find that the petitioner has not produced any document to support his plea of the investment by the respondent in business transaction. This plea in fact proves existence of a financial transaction between the parties by admitted payment of money by the respondent. Issuance of cheques totally amounting to Rs,20,80,000 by the petitioner is also a proof that the respondent's money was backed by the petitioner's cheques. The petitioner admitted the receipt of money claimed by the respondent plaintiff and the issuance of post-dated cheques forming subject-matter of the suit.
The petitioner further admitted in his application/affidavit that upon dishonouring of the cheques issued by him, more cheques for a cumulative sum of Rs,17,80,000 were also issued by his son Shahid. The nature and the value of the defence plea terming these cheques as securities and the effect thereto can only be determined upon investigation in a trial particularly in the perspective of the admitted execution, issuance of cheques by the petitioner and dishonouring of the same.
' Furthermore, blank and unsubstantiated oral pleas of the petitioner are not adequate at this stage to displace the initial presumption attached under section 118 of the Negotiable Instruments Act that the negotiable instruments were made, drawn, accepted or endorsed for a consideration. The petitioner has yet to discharge his onus of proof that the cheques made and drawn by him were not for a consideration.
19. Under these circumstances, this Court is of the considered opinion that the learned trial Judge validly and reasonably exercised the discretionary powers vesting in him to grant leave to defend the suit conditionally upon the submission of surety bond equal to the disputed amount by the petitioner. The learned trial Judge was also justified in rejecting petitioner's application for review through the impugned order dated 8-7-2003. As such the impugned orders do not deserve interference by this Court.
20. During the course of hearing of this civil revision, on Court's query and suggestion, the learned counsel for the petitioner clearly and categorically refused to accept extension in time to comply with the term/condition as imposed by the learned Additional District Judge in the leave granting order dated 27-6-2003. The learned counsel for the petitioner firmly and categorically stated that even if this Court shows any indulgence of extending time which was not prayed for, the petitioner will not comply with the term of submission of surety bond as he cannot.
21. Under these circumstances and for the reasons stated above, this civil revision is liable to be dismissed.
22. The petitioner's learned counsel has though partly denied to accept any equitable assistance of the Court yet this Court cannot overlook its duty to exercise restraint, indulgence and compassion towards the litigants who in this case are close relatives as well. The learned trial Judge protected the respondent plaintiff by demanding a surety bond for the suit amount from the petitioner defendant, who defaulted for no valid reason at all. Yet this Court is inclined to allow an opportunity of a trial to the petitioner defendant by granting further time uptil 31st January 2005 to the petitioner to furnish a surety bond for the suit amount as per order dated 27-6-2003 of the learned trial Judge. As a consequence thereof, order dated 8-7-2003 is modified by directing deletion of para. 4 thereof relating to the returning of the written statement to the petitioner. However, if the petitioner fails to furnish the surety bond up to 31-1-2005, the said order dated 8-7-2003 shall remain in the field and the learned trial Court shall proceed to decide the suit expeditiously in accordance with law.
23. This civil revision is thus decided in above terms with no order as to the costs. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.