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Issues: (i) Whether the defendants had made out a triable or bona fide defence so as to be entitled to leave to defend in a summary suit under Order XXXVII of the Code of Civil Procedure, 1908; (ii) Whether the existence of an arbitration clause in the invoices barred the civil suit and required reference of the dispute to arbitration.
Issue (i): Whether the defendants had made out a triable or bona fide defence so as to be entitled to leave to defend in a summary suit under Order XXXVII of the Code of Civil Procedure, 1908.
Analysis: The defendants did not dispute the execution of the written undertaking or the issuance of cheques towards the admitted liability. Their sole plea was that signatures were allegedly obtained on blank documents and that the undertaking was fabricated. The written acknowledgment of debt and dishonoured cheques gave rise to a strong presumption against the defendants. In the absence of any credible material to support the alleged fabrication, the defence was found to be illusory and moonshine. The settled principles governing summary suits required refusal of leave where no real defence was disclosed.
Conclusion: The defendants were not entitled to leave to defend, and the application for leave to defend was rejected.
Issue (ii): Whether the existence of an arbitration clause in the invoices barred the civil suit and required reference of the dispute to arbitration.
Analysis: The dispute was already supported by a written undertaking acknowledging liability and by dishonoured cheques issued towards the outstanding amount. On those facts, there was no live controversy requiring adjudication through arbitration. The arbitration clause relied upon by the defendants did not displace the civil court's jurisdiction in the circumstances of the admitted written liability. Sections 5 and 8 of the Arbitration and Conciliation Act, 1996 were therefore held not to assist the defendants.
Conclusion: The suit was not liable to be referred to arbitration, and the arbitration-based objection failed.
Final Conclusion: The defendants' applications were dismissed and the plaintiff's recovery claim succeeded with costs and pendente lite and future interest at the rate granted by the Court.
Ratio Decidendi: In a summary suit, a written acknowledgment of debt supported by dishonoured cheques will defeat a sham defence and justify refusal of leave to defend, and an arbitration clause will not compel reference where liability is already admitted in writing and no real dispute survives.
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