Cheque liability suits: auction purchaser not a necessary party, and conditional leave to defend may be imposed on insufficient defence.

In a summary suit based on cheque liability, the court held that the auction purchaser of the secured asset was not a necessary party because the primary liability remained with the cheque drawer, and the plaintiff was not bound to implead a person with only collateral or contractual connection to the debt. On leave to defend, the court applied the presumption of consideration under the Negotiable Instruments Act and held that the directors had a sufficient defence for unconditional leave, while the company's defence justified only conditional leave. The company was therefore permitted to defend the suit only on furnishing security.

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Issues: (i) Whether the auction purchaser of the secured asset was a necessary party to the summary suits and could be impleaded to answer the cheque claims against the company. (ii) Whether the defendants were entitled to unconditional leave to defend or whether leave could be granted subject to furnishing security.

Issue (i): Whether the auction purchaser of the secured asset was a necessary party to the summary suits and could be impleaded to answer the cheque claims against the company.

Analysis: The claims in suit arose from cheques admittedly issued by the company, so the primary liability lay on the drawer of the cheques. The liability under the cheque transactions was personal to the drawer, and even if another person might have some contractual or statutory exposure, the plaintiff could choose whom to sue among joint obligants. The reference to Section 13(7) of the SARFAESI framework did not assist the company because the provision concerns distribution of sale proceeds and not compelled impleadment of the auction purchaser in a money suit. The agreement relied on by the company did not create a clear basis to fasten the cheque liability on the purchaser or make its presence indispensable for adjudication of the plaintiff's claim.

Conclusion: The auction purchaser was not a necessary party and the refusal to implead it was justified.

Issue (ii): Whether the defendants were entitled to unconditional leave to defend or whether leave could be granted subject to furnishing security.

Analysis: Section 118 of the Negotiable Instruments Act raised a presumption in favour of consideration for the cheques, and the suit was for enforcement of admitted cheque transactions in a commercial setting between companies. The directors showed a possible defence on personal liability, which justified leave to defend in their favour. As regards the company, however, the defence was not found strong enough to merit unconditional leave. Since the Court found enough doubt about the defence to justify trial but not enough merit to allow an unrestricted defence, conditional leave could be imposed. Security was therefore directed as a condition for defending the suit, and the trial court's laconic order was replaced by a reasoned conditional grant.

Conclusion: The directors were entitled to unconditional leave to defend, while the company was entitled only to conditional leave to defend on furnishing security.

Final Conclusion: The company's challenge to impleadment failed, the directors succeeded in getting unconditional leave to defend, and the company was permitted to defend only on the condition of furnishing security, so the matter proceeded accordingly.

Ratio Decidendi: In a summary suit based on cheque liability, the plaintiff is not bound to implead every person who may have some collateral or contractual connection with the debtor, and where the defence is not plainly good but raises only a qualified doubt, leave to defend may be granted subject to security.

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