05 January 2024 Cheque Bounce >> Civil/Debt  

A Defendant in a high-stakes debt case has failed to convince a High Court to overturn a lower court's order requiring a Rs. 10 crore deposit for conditional leave to defend.

Background:

The case involves a civil suit filed under Order XXXVII of the Code of Civil Procedure, 1908 (CPC). The Plaintiff (creditor) claims the Defendant (debtor) owes Rs. 10 crore along with interest. This claim is based on two cheques issued by the defendant for a total of Rs. 10 crore and a handwritten undertaking allegedly signed by the defendant acknowledging a debt of Rs. 22 crore.

The Defendant disputes the claim entirely. They argue that the cheques were signed in blank and the undertaking is fabricated.

Trial Court's Decision:

The Trial Court granted the Defendant conditional leave to defend the case, but required a deposit of Rs. 10 crore. This means the Defendant can defend the case, but only if they first pay this substantial sum into the court.

Defendant's Appeal:

The Defendant challenged this conditional leave order in the High Court. They argued that the Trial Court erred in requiring a deposit without sufficient evidence from the plaintiff. They contended they have a strong defense and should be allowed to defend the case unconditionally.

High Court's Ruling:

The High Court dismissed the defendant's petition and upheld the Trial Court's order. The Court's reasoning focused on several key points:

• Delay and Conduct: The High Court noted the defendant's significant delay in challenging the conditional leave order and their conduct in related proceedings raised doubts about their good faith.
• Evidence for Plaintiff's Claim: The Court found the dishonored cheques and the signed undertaking established a basis for the plaintiff's claim, requiring the defendant to defend themselves at trial.
• Weak Defense: The Court viewed the defendant's explanation of issuing blank cheques as a weak defense that would require proof in court.

Limited Scope of Review:

The High Court emphasized its limited role under Article 227 of the Indian Constitution. This provision allows the High Court to oversee lower courts but only in exceptional circumstances. The Court will only intervene in cases of grave injustice or clear legal errors.

Burden of Proof:

The High Court decision reinforces that the burden of proof lies with the defendant in challenging a conditional leave to defend order. The defendant must demonstrate a strong defense to convince the Court they deserve an unconditional opportunity to defend the case.

  Code of Civil Procedure, 1908    Negotiable Instruments Act, 1881