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Present: Garvin A.tJ.J. and-Lyall Grant J
RAMANATHAN o. FERNANDO et al.
72 and 73—D. G, (Inty,) Colombo, 35,505
Liquid claim—No valid defence disclosed—Right of defendant to appearand defend—Deposit of claim—Ciotl Procedure Code, Ch. LIII.
In an action upon a liquid claim brought under Chapter Lin. ofthe Civil Procedure Code, the defendant has the right to appearand defend upon depositing in Court the amount in claim, evenwhere the Court finds that no valid defence is disclosed.
Per Ltall Grant J.—Where a Judge rejects the affidavit ofthe defendant, his order ought to. fix a time within which theamount sued for should be deposited in Court and to state that,unless the money is deposited within the time so fixed', leave toappear is refused.
PPEAL from an order of the District Judge of Colombo.This was an application for leave to appear and defend in an
action on a promissory note. At the time of the making and theendorsement of the promisoiy note sued upon, the defendants-appellants were partners. Their case was that the promissory notewas endorsed and delivered to the plaintiff in pursuance of anagreement between the plaintiff and the Auto Carriers Company,whereby the former advanced money to them and received inexchange promissory notes granted to the firm by purchasers ofmotor cars on the instalment system. After some time it was agreedthat the Company should liquidate the debt by monthly payments,the plaintiff undertaking to return the promissory notes to the valueof the payments. In accordance with this agreement the amountpayable on the note sued upon had been paid to the plaintiff, whoin breach of the undertaking had failed to return the promissorynote. The learned District Judge was not satisfied that theallegations were' a defence to the action and refused leave todefend.
H. B. Koch, for second defendant, appellant.—The DistrictJudge should have allowed us leave to defend.
Sections 704 and 706 of the Civil Procedure Code contain theprovisions governing the granting of leave to defend, and the Englishlaw has no applicability. (Moncrieff J. in Annamaly Chetty v.Ali Marikar.1) The fact that the affidavit is held not to be bona fideand may subsequently be proved to be false might lead to a prose-cution for perjury (Bonser C.J. in Meyappa Chetty v. Usoof2),but a defendant is entitled to leave to defend on giving security, or,at the most, on depositing in Court the amount claimed. Section706 invests no discretion in the Court to refuse leave if the money
is brought into Court.
1 2 Browne 267.
* 5 N.L. R. 265.
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Leave was allowed in Silva v. Sudirs,1 where the defendant didnot attempt to excuse his delay. Our position is stronger here asour delay has been explained. The money has now been depositedand no prejudice could be caused to the plaintiff by our beingallowed to file answer.
H. H. Bartholomeusz, for third defendant, appellant.
F. A. Hayley, K.C. (with Nadarajah), for the plaintiff, respon-dent.—Sections 704 and 706 of our Civil Procedure Code are takenfrom sections 532 and 533 of the Indian Code of 1882, which in tomwere adapted from the English Act (18 & 19 Viet. c. 67), which related.solely to Bills of Exchange. The object of the Legislature is toprevent frivolous defences. In England under Order. 14,. leave isnot allowed even where money is brought into Court, if the defenceis .held not to be a bona fide one. (.4<7ra and M as term an’s Bank v.Leighton.2)
Section 704 deals with bad defences.
Section -706 deals primarily with good defences.
Under section 706, even where a good defence is disclosed theCourt can demand security. So the Court has the right to refuseunconditionally where there is no defence.
Simon v. Sheriff 3 was a case under sections 532 and 533 of the oldIndian Code, where leave was refused outright.
Sanjiva Bao’s All India Digest, Vol. 7, p. 876.—Where there isno pretence of a defence, leave should be refused. It is only .wherethere is a doubt with regard to the bona fides of the defence thatsecurity should be demanded or the .amount ordered to be deposited.
[Garvin A.C.J.—The question is whether in any circumstancesa man can be prevented from buying, as it were, his right to defend,irrespective of the bona fides or otherwise of his defence, by bringingthe money into Court.]
Rampini's Commentary an the Indian Civil Procedure Code, section533 (at page 784 contemplates the case of a refusal.
The section gives the Court a discretion with regard to grantingleave. Therefore the Court must be allowed to refuse if it thinks fit,and the discretion cannot be ousted by the payment of the moneyinto Court.
The second defendant here is out of time, and the granting ofleave to defend was entirely in the discretion of the Court.
F. H. B. Koiih, in reply.
June 27, 1930. Garvin A.C.J.—
These are appeals from an order refusing leave to appear anddefend an action instituted under the provisions of Chapter LIII. of1 7 C. W. R. 186.2 (1866) L. R. 2 Ex. 56.
* I. L. R. 19 Mad. 368.
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the Civil Procedure Code. The appeal numbered 72 is by the third 1980defendant; appeal numbered 73 is by the second defendant.Gasvix
At the time' of the making and also of the endorsement of theA C-J
promissory note, upon which this action is based, these two defendants Bamanathaitwere partners. The third defendant has since retired. The third ^ »•defendant’s application for leave was made within time but the°
second defendant made his application after the time allowedbut before decree. They both filed affidavits, of which the seconddefendant's is the fuller.
The third defendant is a lady who it is said took no active partin the business at any time and has no personal knowledge of thetransaction. Her affidavit is expressed to be based on informationreceived, it is in some respects inconsistent with the averments inthe second defendant’s affidavit. But in broad outline her storyis that since her retirement from the business in June, 1927, and asa result of an agreement made thereafter between her late partnerthe second defendant, and the plaintiff) and moneys paid andpromissory notes delivered to the plaintiff by the second defendantin terms thereof, the promissory note sued on was discharged andthat the plaintiff is, in any event, debarred, by the agreement referredto and its performance by the second defendant, from suing her.
The case for the second defendant is that this promissory note wasendorsed and delivered to the plaintiff in pursuance of an agreementbetween the plaintiff and the Auto Carriers Company, whereby theformer advanced moneys to them and received the promissory notesgranted to the firm by purchasers of motor cars on the instalment-system as security for the payment by them of the purchase price.
He alleged that in September, 1928, it was found that the plaintiffheld promissory notes to the value of Rs. 300,000 as against a debtof Rs. 120,000, and that it was then agreed that the Auto Carriers. Company should liquidate this debt by monthly payments, theplaintiff undertaking to return promissory notes to the value of the^payments “ already made and thereafter to be made the plaintiff .further agreeing that the defendant should receive payment fromhis customers of the moneys due on the promissory notes.
In accordance with this agreement he says,' he paid to the plaintiffRs. 56,645, including the amount- payable on the promissory notesued on in this case, which to the knowledge of the plaintiff he hadrecovered from the maker, but that the plaintiff in breach of hisundertaking failed to return to him any of the promissory notes andhas in his possession promissory notes to the value of aboutRs. 200,000 in respect of which he says the Company has dischargedits liability.
It was contended that these facts sufficiently disclosed the casefor the defendant (a) that this promissory note has^bjeen discharged
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and' (6) that the defendant was entitled to claim that the plaintiffshould return’ to him promissory notes to the value of approximatelyBs. 200,000.
The District Judge was not satisfied that the plaintiff knew thatthe money due on this promissory note had been paid by the maker,and in the absence of an allegation that the payments alleged tohave been made by the defendant were made against specific debts,he thought, the allegations afforded no defence to the action.The claim for an accounting, he treats, as an “ attempt to delaymatters
The affidavits filed by the defendants are not satisfactory. Makingevery allowance for the circumstance that they are affidavits andnot formal answers, it was both possible and necessary to setout all the essential facts with accuracy and marshall them soas to disclose the defence or defences which it was intended toset up.
I am prepared to take this case on the footing of the Judge’sfinding—though I think a different view is at least possible—andtreat this as a case in which no defence has been disclosed andthat the application was made merely to gain time.
In such a case, has the Court power to refuse leave to defend andenter judgment for the plaintiff ? It is beyond question that theCourt has the power, in such a case, to require a defendant to payinto Court the amount mentioned in the summons as a condition ofbeing allowed to appear and defend.
Canr it refuse to grant leave to., appear and defend altogether andabsolutely ?
It is the right of every person against whom an action is institutedto appear and, unless he admits the claim, to file his answer. Forthe purpose of expediting the recovery of claims of the- naturespecified in section 703 by discouraging frivolous, vexatious, andpurely dilatory defences, the Legislature has in such cases curtailedthis right by the requirement that a defendant shall not be admittedto defend the action until he has first obtained leave.
It is provided by section 706 as follows: —
“The court shall, upon application by the defendant, give leaveto appear and to defend the action upon the defendantpaying .into court the sum mentioned in the summons,. orupon affidavits satisfactory to the court, which disclose adefence or such facts as would make it incumbent on theholder to prove consideration, or such other facts as thecourt may deem sufficient to support the application and. on such terms as to security, framing and recording issues,or otherwise, as the court thinks fit. ’’
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The only other part of this chapter which has a direct bearing on 1M®the question under consideration is the proviso to section 704:—Gabvuj
“ The defendant shall not be required, as a condition of his being A C-J*allowed to appear and defend, to pay into eourt the sure liamanathmmentioned in" the summons, or to give security therefor, pe1^ma0unless the court thinks his defence not to be primd faciesustainable or feels reasonable .doubt as to its good faith. ’’
It is a feature of these provisions that nowhere is it said that theCourt may refuse leave. On the contrary, it requires the Court togrant leave. Sarkar in his Commentary on Order 37', Rule 3, of theIndian Code, which is similar to the English rule on the point, contraststhe rule with section 533 of the repealed Indian Code of CivilProcedure, draws attention to the omission from the new rule of thewords upon the defendant paying into Court the sum mentionedin the summons ” and observes that “ under the old section it wasobligatory upon the Court to grant leave ”.
Section 706 of our Code is identical in terms with the old section(533) of the Indian Code, and when read with the proviso to section704 can only mean that it is obligatory on the Court to grant leaveto appear and defend, though it may do so (a) without condition,
(b) upon terms as to security, framing and recording of issues orotherwise, or (c) upon .the more drastic condition that the summentioned in the summons is paid into Court.
Counsel drew our attention to the Summary Procedure on Billsof Exchange Act, 1885 (18 & 19 Viet. c. 67, s. 2), which issubstantially the same as our section 706, and to the' followingpassage in the judgment of Bramyell B. in Agra and Masterman’sBank v. Leighton1: —
" The intention of the Bills of Exchange Act was, that wherethere was no pretence for a defence, the parly sued should. not be allowed to defend, and the holder should havejudgment as of course; but that if the defendant had areal, I do not say good, defence, he should have leave toappear and set it up. ”
As a statement of the intentions of the Legislature, this is sub-stantially the same as that set out in the title to the bill. It doesnot purport to interpret the section or to hold that the Court haspower to refuse leave altogether, nor can I regard it as authority forthat proposition. These observations were only preliminary to theconsideration of the questions before the Court and its decisionthereon, which was that leave to appear and defend should be givenwhenever there is an apparently real defence and that leave shouldin such a case be given unconditionally unless there is reason todoubt its bona fide. The point now before us was neither taken norconsidered', nor did it arise in that case.
1 L. R. 2 Exch. Cases 50.
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The Legislature in Ceylon has evidently thought it sufficient forits object, which I assume is to facilitate the recovery of the claimsspecified in Chapter LIII., to curtail the ordinary right of a defendantto answer by the requirement that he shall first obtain leave to doso and by vesting in the Court a discretion to grant leave uponterms or upon payment of the sum claimed into Court, except incases in which the application should be granted without condition.
The law in India has now been brought into line with the EnglishRules and Orders by vesting in the Court a discretion to refuse leave.We must administer the law as it has been enacted, leaving it to theLegislature t.o amend it, if it thinks such a course necessary ordesirable.
It was then argued that inasmuch as the defendant did not bringinto Court with his application the sum mentioned in the summonsthe Court, was entitled to refuse leave. Section 704 does not imposeany such obligation upon an applicant for leave. He is entitled toapply to the Court for leave to appear and defend, and while it isobligatory that leave shall be granted, it is for the Court to saywhether it will do so without condition upon terms a6 to securityor only upon his paying into Court the sum mentioned in thesummons. All the law requires him to do is to apply to the Court.It is the duty of the Court then to make such order t.hereon a6 it isempowered to make. The Court may grant leave only upon hispaying the sum into Court, and in that event he should be given anopportunity to do so.
The sum mentioned in the summons has in this case been paidinto Court. I would therefore allow the appeal of the third defend-ant and direct that she be grantee! leave to appear and defend, andI further order that her answer be filed within ten days from the dayon which this record reaches the Court below or within such extendedtime as the District Judge may in his discretion allow.
I would make the same order on the second defendant’s appeal.His defence and that of the third defendant are substantially thesame, and if he is refused leave it can only be as a penalty for notmaking his application in time. He has given an explanation.The District Judge was not prepared to accept it in its entirety,basing. his conclusion mainly upon a statement made at the barunsupported by the affidavit or evidence of the plaintiff. But therewere negotiations for a settlement of this action, and whether theyproceeded as far as is alleged or hot, I see no reason, in the absenceof any evidence to the contrary, to doubt that the second defendanthad reason to .think that there was or would be no need to entera defence to the action.
For reasons which are sufficiently manifested in this judgmentI make no order as to the costs of these appeals. There will be nocosts in the Court below.
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JiYALIi GbANT J.—1930
Sections 704 and 706 of the Civil Procedure Code appear to me r?.f1t,^^; juclearly to indicate that a person sued on a Bill of Exchange has «.■always the right to appear and defend upon deposit of the sum sued Fernando,for. It was conceded bv respondent’s Counsel that the law bothin England and in India has been amended from time to time so asto deprive the person so sued of this privilege in the absence ofsatisfactory affidavits.
Our law, however, is in practically the same terms as sections•532 and 533 of the Indian Procedure Code of 1882, and the Indian•commentators are agreed that the effect of the 1908 Code was towithdraw the privilege. By that Code the practice was assimi-lated to the present law of England.
In the absence of any such modification in the law of Ceylon,
I agree that the defendant has, on deposit in Court of the sum suedfor, an unqualified right to appear and defend.
I think that, where a Judge rejects the affidavits of the defendant,his order ought to fix a time within which the amount sued for shouldbe deposited in Court and to state that unless the money is-depositedwithin the -time so fixed leave to appear is refused.1 This willobviate the necessity for a further order.
It would be unfair to require a deposit at an earlier stage in a•case where the defendant has applied for leave to appear withoutdepositing the amount. That question must first be considered.
In the present case the defendants had no reasonable opportunityof making a deposit before the final order was made, and I agreethat they should have such an opportunity.