' ZAFFAR HUSSAIN MIRZA, J.-This petition for special leave to appeal arises out of a pending Suit No, 282 of 1977 on the original side of the High Court of Sind at Karachi. This suit has been filed by respondent United Bank Limited against the petitioner Abdul Karim Jaffarani and respondents Nos.
2 and 3 herein for recovery of Rs, 2,259,483.97 under Order XXXVII of the Code of Civil Procedure so far as the petitioner is concerned and under Order XXXV of the Code of Civil Procedure so far as respondents Nos. 2 and 3 are concerned. The petitioner according to his allegations put in appearance in Court before the service of the summons and made an application under Order XXXVII, dated 10-10-1981 granted leave to defend the suit to the petitioner but attached conditions requiring him to furnish a security equal to the sum of the claim in suit within two months. The petitioner being aggrieved by the imposition of the conditions for furnishing security challenged the order in an Intre Court Appeal before a Division Bench of the High Court which dismissed his appeal except for modifying the nature of the security.
2. The petitioner seeks to challenge the orders passed by the High Court' granting conditional leave to defend the suit filed against him and the main question raised in this petition was, whether in the facts and circumstances of this case the learned Judges of the High Court were justified not to grant leave unconditionally. On the first hearing of the petition since a short question was involved in this case, notice was ordered to the respondent in order to dispose of the case by converting the petition into an appeal, if found necessary.
3. We have now heard Mr. J. Rahimtoola, Advocate for the petitioner and Mr. Mamoonul Hassan, Advocate on behalf of the respondent No,
1. The first respondent's case as disclosed in the plaint was that in 1969 the petitioner was maintaining two current accounts with the Chundrigar Road Branch of the respondent-bank. These accounts bore Nos. CD-10819 and CD-11280, from which the petitioner was said to be availing credit facilities. On 4-6-1969 there was a debit balance of Rs, 1,08,282 in Account No, CD-10819 and in order to secure the said balance the petitioner executed a promissory note of the same date in favour of the first respondent for an equal sum of money with interest at the rate of four per cent. Over the State Bank rates with monthly rests. Subsequently on 5-1-1970 when a debt balance of Rs, 5,10,998.53 was outstanding in the said account it was transferred to the petitioner's Account No, CD-11280. It was further averred that the petitioner availed of credit on the security of pledge of shares and mortgage of the property belonging to his wife (respondent No, 2). On 15-10,1970 the petitioner's wife created an equitable mortgage in favour of the first respondent in respect of her bungalow at Sindhi Muslim Co-operative Housing Society Karachi to secure the outstanding debts from the petitioner to the extent of Rs, 30,000 although it is the case of the said respondent that the security extended to all the outstanding debts on the basis of an alleged oral agreement. In order to recover the outstanding dues from the petitioner the respondent-bank sold some of the pledged shares of the petitioner and has adjusted the proceeds thereof against the outstanding amount. Finally the respondent-bank has averred that as on 26-3-1974 an amount of Rs, 59,483.97 was outstanding debit balance in the combined account of the petitioner, for which he executed a promissory note on the same date. This amount not having been paid, the respondent-bank brought the suit on this promissory note under Order XXXVII of the Code of Civil Procedure against the petitioner and sought a mortgage decree against respondent No, 2 for the same amount.
4. In the supporting affidavit to his application for leave to defend the petitioner has disputed having received or having withdrawn from his accounts the suit amount. He further contended that the two promissory notes referred to in- the plaint contained blanks which have been filled up on a ' subsequent rate in order to bring the suit within time. As regards notes the amount mentioned in the promissory notes he stated as under.
"I solemnly state that neither the amount shown as the consideration of the alleged promissory note nor the date typed subsequently thereon are correct."
He pointed out that the place for mentioning the rate of interest is even now left blank. The authority for sanctioning such a huge amount of loan by way of over draft facility was alleged to have been withheld and the amalgamation of the two accounts has been challenged to be without the authority of the petitioner. It was asserted that the petitioner had not operated any of the two accounts from January, 1971 onwards. The plea of time bar was also raised in the application.
5. It is an admitted position that no counter-affidavit was filed in reply to the affidavit of the petitioner in support his application for leave to defend. Learned counsel for the first respondent submitted before us that the application was given without the supporting affidavit to which a counter-affidavit was filed by the said respondent which is on the record of this petition (page 37) and the affidavit relied upon by the petitioner was filed by him thereafter. Counsel contended that the subsequently filed affidavit by the petitioner cannot be looked into. The learned counsel for the petitioner explained that the petitioner had voluntarily appeared before the Court and submitted the application for leave stating therein that since he had not yet been served with the copies of the plaint and annexures, the affidavit would be submitted subsequently. However, we do not find from the impugned orders of the High Court any objection raised to the same effect by the respondent and it appears that the affidavit of the petitioner was taken into consideration by the learned Single Judge as well as the Division Bench. We are, therefore, not inclined to permit the learned counsel for the first respondent to raise this objection at this stage.
6. Now there is no dispute before us that the petitioner is entitled to defend the suit as he had made out a case which raises triable issues to go trial between the parties. The question is, as already observed, whether the petitioner is entitled to unconditional leave to defend. The main grievance on behalf of the petitioner was that the learned Judges of the High Court have not appreciated the principles of law that entitled a defendant for the grant of unconditional leave.
Indeed the submission was that the distinct between the governing principles in cases for the grant of conditional and unconditional leave have not been taken into consideration. In the submission of the learned counsel for the petitioner since there was prima facie evidence to show that the promissory note on which the suit was based was originally an inchoate instrument subsequently filled in after great lapse of time and not with reasonable time and since the considers ion for the said instrument as it purports to show on its face was denied the statutory presumption under section 118 that the instrument was drawn for consideration did not arise and, therefore, this was pre-eminently a case for unconditional leave to defend. On the other hand it has been strongly contended on behalf of the first respondent that since the execution of the promissory note is not denied by the petitioner, the statutory presumption initially arises and it will be for the petitioner to discharge the onus at the trial to prove that the instrument was filed in contrary to its purport subsequently and without any authority as to the date and the amount mentioned therein. It was accordingly submitted that in these circumstances the discretion exercised by the High Court in subjecting the leave to defend to the conditions prescribed in the impugned orders was proper in the circumstances of the case and does not call for interference.
7. Order XXXVII, rule 3 of the Code of Civil Procedure provides that, in suits on negotiable instruments triable by the summary procedure, the Court shall give leave to the defendant to appear and defend the suit if his affidavits "disclosed such facts as would make it incumbent on the holder to prove consideration, or such other facts as the Court may deem sufficient to support the application". This rule also authorises the Court to give unconditional leave or subject to such terms inter alia, as to payment into Court or giving security as the Court thinks fit. The scope of the provisions of Order XXXVII, rule 3 of the Code of Civil Procedure has been laid down by the superior Courts in a number of authorities. The leading case in this regard by this Court which lays down the principles for the determination of the question whether leave to defend should be granted in a given case is the case of Fine Textile Mills Ltd. v. Haji Umar (1). Hamoodur Rahman, J., (as he then was) observed that the principles upon which the aforesaid provision should be applied were comparable to a similar provision in the Rules of the Supreme Court in England and enunciated them in the following passage :- "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 Court approved of the rule laid down in the case of Kodak v. Alpha Film Corporation (2), that at the stage when the 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". This case has been followed in several judgments of this Court. Our attention has, however, been drawn to the Dorab Shah B. {{FOOT NOTE}}
(1) PLD 1963 SC 168 (2) (1930) 2 K B 340 {{FOOT NOTE}} ' Dalai v, Messrs Premier Bank Ltd. (1), in which the report mentions an observation by the learned members of the Bench of this Court to the effect that the Fine Textile Mills case does not lay down the law correctly. There is, however, no discussion or reasons assigned for this statement and we are, therefore, inclined to think that there is some mistake somewhere, since the citation also does not, from the text of the order under report, seems to be relevant. Learned counsel for the contesting respondent has brought to our notice several judgments of this Court in order to support his submission that the question whether conditions should be imposed or not while granting leave to defend was a matter in the discretion of the trial Court and depending on the facts and circumstances of each case. There can be no quarrel with this proposition but it also cannot be gain said that the discretion is judicial and as in all cases of judicial discretion axiomatically has to be exercised on judicial principles and not arbitrarily. No case was brought to our notice by the learned counsel from our jurisdiction which has clearly laid down the distinguishing principles for the grant of unconditional leave to defend and grant of such leaves subject to conditions. In Muslim Commercial Bank Ltd. v. Tayab Sharif ( ), an observation was made to the effect that the facts disclosed in the supporting affidavit of the application for leave to defend if true, raised the plea of the debt being fully satisfied and, therefore, "grant of unconditional leave cannot he said to be unjustified or unreasonable". In Karim v. Zikar Abdullah (3), the question was directly raised. While commenting on the law laid down in Fine Textile Mill's case it was observed "the decision relied upon by the learned counsel for the petitioners deals mainly with the principles which ought to guide the Court for granting leave to defend. It can, however, be indirectly inferred that unconditional leave might be granted where the defence appears to be incontrovertible".
8. The review of the cases, therefore, reveals that no hard and fast rule can be laid down for determining the question as to how the discretion vesting in the Court to subject the order for grant of leave to defend to conditions, ought to be exercised as this question depends on the facts and circumstances of each case. It would be improper to lay down a rule or thumb for the exercise of power in matters of discretion vesting in a Court, when even the statute has left it unfettered.
However, we would point out that in order to correctly exercise the discretion vesting in a Court under the provisions in question, it is necessary to examine the scope and object underlying such provisions providing for special procedure of this kind. In view of the legislative history of these provisions, the overall object envisaged by the Legislature was to provide for expeditious disposal 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 prevent the plaintiff from obtaining an early decision by raising untenable and frivolous defences. It is in this context that the discretion to impose conditions is to exercised. If, therefore, the Court is of the opinion that the defendant is trying to prolong the litigation and impeding a speedy trial, although on the allegations made in the application a triable issue has been raised then the Court would be justified to impose conditions. But, as already pointed out, it will be improper exercise, of discretion to impose conditions simply because, at the leave granting stage the defendant is unable to adduce his {{FOOT NOTE}}
(1) 1976 SC M R 67 (2) 1975 SCMR 398
(3) 1973 SCM R 100 {{FOOT NOTE}} ' evidence on the pleas raised in his defence. The proper stage for substantiating his defence by evidence would be at the trial subsequently.
9. Mr. J. H. Rahimtoola referred us to paragraph No, 519 Vol. 26 of the Halsbury's Laws of England (4th Edition) and argued that a defendant would be entitled to unconditional leave to defend in all cases where he shows that he has a genuine defence, or a plausible defence or that some substantial question of fact or law was to be tried or investigated. On the other hand, he submitted, that conditional leave to defend subject to terms ought to be granted where the defendant consents, or the defence set up is so vague and unsatisfactory that there is doubt as to whether there is any defence. However, we are not taken to the provisions of law that came under interpretation in cases where these principles were laid down by the English Courts, in order to apply them to the statutory provisions under interpretation in this case. Be that as it may, we were first of the tentative view that even on the principles relied upon by the learned counsel as quoted from the English decisions incorporated in the commentaries by Halsbury, the defence set up by the petitioner would appear to be vague at this stage. In this regard we invited the learned counsel to the averments made in the paragraph 5 of the affidavit of the petitioner where he has asserted that the promissory note has been subsequently filled up as to the amount as well as the date, but since admittedly he was a signatory of the paper which constitutes the promissory note, he should have been able to say when he had given the promissory note to the contesting respondent and what amount has been agreed to be written therein. The only answer given by the learned counsel was that upon the face of the alleged promissory note dated 26-3-1974 the typist who seems to have typed not the same initially had put the date as 24-2-1970 at the bottom of the document. In the absence of evidence, however, it is difficult to agree with this explanation as the figures are 2402070. In any case this is not a satisfactory reply to the objection that the plea of the petitioner at this stage as to the real date of issue of the promissory note and the agreed amount has been left vague.
10. This, however, does not conclude the matter. We find that the learned Single Judge has proceeded on the assumption that the execution of the promissory note, upon which the suit was filed, was admitted by the petitioner and, therefore, he concluded "that the burden is upon him to establish that it was obtained by fraud or that it has been delivered blank and has wrongly been filled in by the plaintiff which is not in terms of the agreement". It was on this basis that the learned Judge appears to have felt that the conditional leave upon terms requiring the petitioner to furnish security was justified. The learned Judges of the Division Bench agreed with the view that prevailed with the learned Single Judge. From the affidavit of the petitioner, however, it cannot be said that he had admitted the execution of the promissory note in view of the plea taken by him that the blank promissory note was given by him and the amount mentioned therein was an inflated figure not agreed upon between the parties. There is a distinction in law between, "execution' of a document and the admission of the signature appearing on a document. The word "execution" means that the party by affixing his signature or mark has signified his assent to the contents of the document and if a party admits that he has done this, than he admits execution. The execution of the promissory, note was clearly not admitted in this sense. "The promissory note" has been defined in section 4 of the Negotiable Instruments Act, as an instrument in writing containing an unconditional undertaking, signed by the maker, to pay on demand or on fixed or determinable future time a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument. Therefore, when the petitioner alleged that the amount was not mentioned and the figure ultimately filled in as the amount payable under the instrument was exaggerated it could not be inferred from such pleas that the execution of the instrument was admitted. Learned counsel for the petitioner had addressed arguments on section 20 of the Negotiable Instruments Act and contended that an incomplete instrument can only quality to be a negotiable instrument when the amount is filled up within a reasonable time strictly in accordance with the authority given by the drawer.
11. In view of what has been stated above, it seems that the decision of the High Court has proceeded on the basis of the promissory note according to its face value. However, the perusal of the plaint shows that the contesting respondent took the plea that by means of this instrument the petitioner promised "in writing to pay on demand to the plaintiff the sum of Rs, 22,59,485.97 outstanding in the said account". Learned counsel for the said respondent stated at the bar that this plea has been taken in the alternative to enforce the contract contained in the alleged promissory note as a promise to pay a time-barred debt under section 25 of the Contract Act. This submission placed the case in an entirely different context. On further examination of the relevant facts pleaded by the first respondent in the plaint, it would appear that the transactions between the parties commenced in the year 1969 when two separate current accounts were being maintained by the petitioner and credit facilities were being extended to him by the said respondent. In regard to one of the accounts the petitioner is said to have executed on 4-6-1969 a promissory note for Rs, 1,08,282 which was the outstanding debit balance, in the account. In this account there was a debit balance of Rs, 5,10,998.53 on 5-1-1970, when this debit balance was transferred to the other account of the petitioner. The authority for doing so has not been pointed out. Apparently the cause of action for recovering the amount of the previous promissory note dated 4-6-1969 expired after the lapse of three years. In the combined account according to the first respondent there was a debit balance of Rs, 22,59,483.97 when the second promissory note, on which the suit seems to have been filled, was allegedly given by the petitioner. This amount also includes the -amount of the previous promissory note and the transferred outstanding balance in the other account as well. On this date the loans extended to the petitioner by way of over draft beyond three years prior thereto, were prima facie not recoverable as action in a Court of law would be barrel b) limitation but for the alleged promissory note. According to section 43 of the Negotiable Instruments Act there is no obligation to pay on a negotiable instrument if it is accepted or endorsed without conservation. It was contended on behalf of the petitioner that he had not operated the account after 1970. It is in this context that the learned counsel for the contesting respondent submitted that the promissory note in question was also being relied upon as a contract for payment of time-barred debts. This, however, places the entire case in a different perspective. It is implied in this submission that the consideration for the promissory note in regard to the amounts the recovery of which had become barred by time was the promise of the petitioner to pay the time-barred debts. It may be inferred from the language of the section 25 of the Contract Act that a transaction to pay a time-barred debt is made without consideration and would be void but for the saving clause provided in sub-clause (3) thereof. The question whether the petitioner agreed to pay the time-barred debts is an important question to go to trial and since this question has arisen from the very pleadings of the first respondent, the defence of the petitioner cannot be held to be altogether sham or colourable. With all respect to the learned Judge of the High Court we are unable to agree that conditions could be imposed merely because of an initial presumption that a negotiable instrument is made fot consideration under section 118 of the Negotiable Instruments Act since this presumption is a rebuttable presumption. As held in the Fine Textile Miles case the question was not whether the presumption should be raised or not but whether the defendants plea that the instrument was not issued for consideration as mentioned in the document was a plausible defence in the circumstances of the case. In our view, therefore, the imposition of the conditions requiring the petitioner to furnish security to the extent of the entire claim of the contesting respondent would amount to rendering the grant of leave to defend illusory.
12. We would accordingly modify the aforesaid conditions. On our inquiry the payments received by the petitioner in terms of the statement of account within a period of three years prior to the execution of the promissory note each side has filed a separate statement. According to the petitioner an amount of Rs, 2,77,155.08 is the amount shown as debit during this period but it is contended that this amount is mostly interest charged on time-barred debts. On the other hand, the figure shown by the first respondent in his statement is Rs, 2,79,800.15. We are not inclined to go into the question whether this amount constitutes actual withdrawals or was debited as interest. If relevant these matters can be gone into at the trial. We would, however, direct that the petitioner shall be entitled to appear and defend the suit on furnishing security in the sum of Rs, 2,80,000 to the satisfaction of the Nazir of the High Court within a period of two months.
13. The appeal is allowed to this extent with no order as to costs.