Delhi High Court Dismisses Defense of Blank Cheque and Unrecorded Cash Payments in Loan Dispute

Delhi High Court, presided by Justice Girish Kathpalia, upheld the dismissal of a leave to defend application in a summary suit filed under Order XXXVII of the Code of Civil Procedure, 1908. The appellants, Sapna and her husband, had challenged the trial court's decree ordering repayment of ₹7,77,500 along with interest to the respondent, Shivesh Garg. The court found their defense of alleged repayment to be frivolous and unsupported by evidence, dismissing the appeal in Sapna & Anr. v. Shivesh Garg (RFA 861/2024).

The respondent, Shivesh Garg, advanced a friendly loan of ₹5,00,000 to the appellants in April 2020, documented through a loan agreement dated June 19, 2020. The agreement included a repayment cheque from the appellants, which was dishonored due to a stop-payment instruction. When the appellants failed to repay, Garg filed a summary suit under Order XXXVII CPC for recovery of ₹7,77,500, inclusive of interest.

The appellants sought leave to defend the suit, claiming they had repaid the loan in monthly cash installments of ₹25,000 over two years, with an additional ₹1,00,000 as interest. They argued the repayment cheque was a blank security instrument. The trial court rejected this defense as frivolous, noting the absence of supporting evidence such as receipts or bank transactions, and granted judgment in favor of the respondent.

The primary issue was whether the appellants raised a substantial or plausible defense warranting leave to defend under Order XXXVII CPC. Justice Kathpalia referred to principles established in IDBI Trusteeship Services Ltd. v. Hubtown Ltd. (2017) 1 SCC 568, which categorizes defenses into substantial, plausible, or frivolous, determining the scope of leave to defend.

Justice Kathpalia found the appellants’ defense neither substantial nor plausible. He highlighted their failure to produce any receipts or bank records to substantiate their repayment claim. A purported WhatsApp screenshot submitted as Annexure A12 was deemed irrelevant and contradictory to their assertion of monthly cash repayments.

The court further rejected the appellants’ claim that the repayment cheque was a blank security instrument, stating:

“The plea that they signed a blank cheque does not sound believable at all. It is nobody’s case that the appellants are illiterate persons, who would sign a blank cheque. The appellants are admittedly engaged in their independent business.”

The judge also criticized the appellants for not reclaiming the loan agreement or the cheque upon alleged repayment, noting the absence of plausible explanations for such omissions.

Finding the appellants’ defense to be frivolous and vexatious, the High Court upheld the trial court’s judgment and decree. The appeal was dismissed, with the court observing that granting leave to defend would unjustly prolong the litigation and undermine the efficiency of summary proceedings.

This decision underscores the judiciary's firm stance on ensuring that summary suits fulfill their purpose of expediting claims where the defendant's defenses are unsubstantial or vexatious.

Date of Decision: December 9, 2024