Summary trial on a cheque, bill or written contract

Order XXXVII Rule 1(1) applies the Order to High Courts, City Civil Courts and Courts of Small Causes, and to other courts as well. The High Court's notification power in the proviso is a power to narrow that, not to grant it: for the courts in clause (b) it may restrict the Order to such categories of suits as it deems proper, and may afterwards restrict, enlarge or vary those categories. Rule 1(2) sets out the suits: suits upon bills of exchange, hundis and promissory notes, and suits in which the plaintiff seeks only to recover a debt or liquidated demand in money, with or without interest, arising on a written contract, on an enactment where the sum is fixed or in the nature of a debt other than a penalty, or on a guarantee where the claim against the principal is for a debt or liquidated demand only.

The instrument has to fit the definitions in the Negotiable Instruments Act, 1881. Section 4 defines a promissory note as an unconditional written undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person or the bearer. Section 5 defines a bill of exchange as an unconditional written order, signed by the maker, directing a certain person to pay such a sum. Section 6 makes a cheque a bill of exchange drawn on a specified banker and payable on demand, and includes the electronic image of a truncated cheque and a cheque in electronic form. A claim for unliquidated damages, or one that needs an account to be taken, does not qualify, and Rule 2(1)(b) requires the plaint to state that no relief outside the Order is claimed.

Rule 2(1) requires the plaint to contain a specific averment that the suit is filed under the Order, a statement that no relief outside the rule is claimed, and the inscription '(Under Order XXXVII of the Code of Civil Procedure, 1908)' below the suit number. The summons is in Form No. 4 in Appendix B. Rule 3(1) requires the plaintiff to serve with it a copy of the plaint and annexures, and the defendant may enter appearance in person or by pleader within ten days of service, giving an address for service.

Under Rule 2(3), a defendant who does not appear cannot defend; the allegations in the plaint are deemed admitted and the plaintiff is entitled to a decree for a sum not exceeding the sum in the summons, with interest at the specified rate to the date of decree and costs, executable forthwith. Rule 5 allows the court to order the bill, hundi or note on which the suit is founded to be deposited with an officer of the court.

Once the defendant appears, Rule 3(4) requires the plaintiff to serve a summons for judgment in Form No. 4A, returnable not less than ten days from service, supported by an affidavit verifying the cause of action and the amount and stating the plaintiff's belief that there is no defence. Under Rule 3(5) the defendant may, within ten days from service of that summons, apply for leave to defend by affidavit or otherwise disclosing facts sufficient to entitle him to defend. Article 118 of the Schedule to the Limitation Act, 1963 puts the same ten days on the application for leave to appear and defend, running from the service of the summons. Rule 3(7) lets the court excuse delay in appearing or in applying for leave on sufficient cause.

Leave may be unconditional or on such terms as the court thinks just. The first proviso to Rule 3(5) bars refusing leave unless the court is satisfied that the facts disclosed do not indicate a substantial defence or that the defence is frivolous or vexatious. The second proviso requires deposit of any admitted part of the claim before leave is granted. Mechelec Engineers and Manufacturers v. Basic Equipment Corporation (1976) 4 SCC 687 held that where the trial court granted unconditional leave on defences that raised triable issues, the High Court could not interfere in revision, judging whether a defence was bona fide before evidence being premature. Its paragraph 8 list of principles no longer stands by itself. In IDBI Trusteeship Services Ltd. v. Hubtown Ltd. (2017) 1 SCC 568 the Supreme Court held that those principles stand superseded by the 1976 amendment to Rule 3 and the four-Judge decision in Milkhiram (India) (P) Ltd. v. Chamanlal Bros., AIR 1965 SC 1698, and put the test as a ladder. A defence the defendant satisfies the court is likely to succeed takes the judgment out of the plaintiff's hands and earns unconditional leave. So, ordinarily, does a fair or reasonable defence that is not a positively good one. Triable issues shadowed by doubt about good faith, and a defence that is plausible but improbable, draw conditional leave, and in the second case the deposit may reach the whole principal with such interest as the court thinks the justice of the case requires. A frivolous or vexatious defence is refused and judgment follows forthwith. Where any part of the claim is admitted, no leave issues until that part is deposited.

Conditional leave sits between the two. In IDBI Trusteeship Services Ltd. v. Hubtown Ltd. (2017) 1 SCC 568 the Supreme Court found the defence to a corporate guarantee plausible but improbable and granted leave only on deposit of the principal sum or security for it. Southern Sales and Services v. Sauermilch Design and Handels GmbH (2008) 14 SCC 457 upheld an order making leave conditional on deposit of part of the admitted amount, reading the second proviso as a condition precedent.

Rule 3(6)(a) entitles the plaintiff to judgment forthwith at the hearing of the summons for judgment if the defendant has not applied for leave, or has applied and been refused. Under Rule 3(6)(b), where leave is granted on condition of security, the plaintiff is entitled to judgment forthwith if the defendant fails to give the security or carry out the directions within the time fixed. Rule 4 lets the court, after decree, under special circumstances set aside the decree, stay or set aside execution, and give the defendant leave to appear and defend on terms it thinks fit.

A defendant who misses the ten-day windows should apply under Rule 3(7) to excuse the delay and, if a decree has already been passed, under Rule 4, with an affidavit that shows both the reason for the delay and the substance of the defence.

A dishonoured cheque can found both a summary suit for the amount and a criminal complaint under section 138 of the Negotiable Instruments Act. The criminal route has its own clock. The cheque must be presented within six months of its date or within its validity, whichever is earlier, the payee must send a written demand within thirty days of learning of the dishonour, and the drawer has fifteen days from receiving the notice to pay. Section 142(1)(b) requires the complaint within one month of the cause of action arising under clause (c) of the proviso, though the court may take it later on sufficient cause.

Both proceedings use the statutory presumptions. Section 118 presumes that every negotiable instrument was made for consideration and that the holder is a holder in due course, and section 139 presumes that the holder of a cheque received it in discharge of a debt or other liability. Basalingappa v. Mudibasappa (2019) 5 SCC 418 held the section 139 presumption rebuttable by a probable defence on the complainant's financial capacity to lend, and restored an acquittal. A summary suit defendant who wants to run that doubt about the lender's means has to put it on affidavit in the leave application, with the material behind it, and say why the Order XXXVII test is answered by it.

In the criminal case, section 143A allows interim compensation of up to twenty per cent of the cheque amount, payable within sixty days, to be repaid with interest if the drawer is acquitted. The criminal law hub on this site covers the complaint itself.

A summary suit on a commercial dispute of Specified Value is still a commercial suit, so section 12A of the Commercial Courts Act, 2015 requires pre-litigation mediation unless urgent interim relief is sought. Order XIII-A, the summary judgment procedure for commercial suits, does not apply to a suit that was originally filed as a summary suit under Order XXXVII, as Rule 1(3) of that Order states. The plaintiff therefore chooses one route at filing.

Limitation for the underlying claim comes from the Schedule to the Limitation Act. Article 35 gives three years on a bill of exchange or promissory note payable on demand from the date of the bill or note, and Articles 36 and 37 deal with notes and bonds payable by instalments. A cheque given in part payment, or a signed acknowledgment of the debt, can restart the period under sections 18 and 19, which the limitation guide in this hub explains.

Rule 7 applies the ordinary procedure to summary suits save as the Order provides. Once leave to defend is granted, unconditionally or on terms that are met, the defendant files a written statement and the suit proceeds to issues, documents and evidence like any other, with the commercial court procedure applying to a commercial suit. From that point the plaintiff keeps only the protection of any deposit or security the court ordered as a condition of leave.

A decree under Rule 2(3) is executable forthwith, and a decree after refusal of leave stands on the same footing as any money decree. Execution runs under section 51 and Order XXI of the Code, as the execution guide in this hub describes. A defendant who appeals must apply for a stay and offer security, since an appeal does not stay execution by itself.