Cheque dishonour fixes limitation and can support jurisdiction; specific payment claims may justify conditional leave to defend.

In a summary suit based on a cheque, limitation was treated as running from dishonour of the cheque, because the right to sue arose when the cheque was presented and returned unpaid, not from the original commercial transaction. Territorial jurisdiction under Section 20(c) CPC was upheld since goods were supplied from Delhi and the cheque was presented there, so part of the cause of action arose in Delhi. On leave to defend, the Court accepted that specific assertions of security cheque status and subsequent payments raised a triable defence, but granted only conditional leave, requiring deposit as security for part of the claim.

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Issues: (i) whether the suit under Order XXXVII was within limitation and the cause of action arose on dishonour of the cheque; (ii) whether the Delhi court had jurisdiction under Section 20(c) of the Code of Civil Procedure, 1908; (iii) whether the defendants disclosed a triable defence so as to merit leave to defend, and if so, whether such leave should be conditional.

Issue (i): whether the suit under Order XXXVII was within limitation and the cause of action arose on dishonour of the cheque

Analysis: The cheque was issued in a running commercial transaction and was presented only when the amount was claimed to be due. The Court distinguished cases where limitation is tied to the original sale transaction and held that, in a suit based on the cheque itself, the right to sue arises when the cheque is presented and is dishonoured. The cheque being returned unpaid for insufficient funds supplied the cause of action for the recovery suit.

Conclusion: The suit was held to be within limitation, and the cause of action was held to have arisen on dishonour of the cheque.

Issue (ii): whether the Delhi court had jurisdiction under Section 20(c) of the Code of Civil Procedure, 1908

Analysis: The goods were supplied from Delhi and the cheque was presented in Delhi. Part of the cause of action therefore arose within Delhi, satisfying the territorial jurisdiction requirement under Section 20(c). The objection based on the place where the cheque was issued was rejected.

Conclusion: The Delhi court was held to have territorial jurisdiction.

Issue (iii): whether the defendants disclosed a triable defence so as to merit leave to defend, and if so, whether such leave should be conditional

Analysis: The defendants asserted that the cheque was a security instrument and produced particulars of subsequent payments said to have been made after issuance of the cheque. The Court held that, at the stage of leave to defend, such an affidavit with specific payment particulars raised a credible triable issue. The defence was not treated as sham or frivolous, but the amounts claimed to have been paid had to be tested at trial. In view of the admitted cheque amount and the payments asserted, the Court considered conditional leave appropriate.

Conclusion: Conditional leave to defend was granted, subject to deposit of Rs. 3,00,000/- within the stipulated time, failing which leave would stand rejected and the suit would stand decreed for the full claim.

Final Conclusion: The decree was set aside to the extent necessary to permit a contested trial on the disputed balance, while the defendants were required to secure part of the claim by deposit as a condition for defending the suit.

Ratio Decidendi: In a summary suit based on a cheque, limitation runs from dishonour of the cheque and an affidavit setting out specific payments or other material facts may constitute a triable defence justifying conditional leave to defend.

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