Petition dismissed, conditional leave upheld. Decision on justifiability, not merits. Rule discharged, no costs.

The court dismissed the petition and upheld the conditional leave to defend granted by the City Civil Court. The court clarified that the decision solely addressed the justifiability of conditional leave and did not express any opinion on the case's merits, which would be determined at trial. The rule was discharged, and no order as to costs was made.

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Issues Involved:
1. Competency of the plaintiff to institute the suit.
2. Territorial jurisdiction of the City Civil Court at Mumbai.
3. Validity of the defendant's claim of having delivered blank signed cheques.
4. Proof of sale and delivery of goods.
5. Discrepancy in the outstanding amount claimed by the plaintiff.
6. Justifiability of the grant of conditional leave to defend upon deposit of the amount covered by the dishonoured cheques.

Issue-wise Detailed Analysis:

1. Competency of the plaintiff to institute the suit:
The defendant contested the plaintiff's competency to institute the suit on behalf of the HUF and as the Proprietor of M/s. Shree Shyam Silk Mills. However, the judgment does not delve deeply into this issue, suggesting that it was not a significant factor in the final decision.

2. Territorial jurisdiction of the City Civil Court at Mumbai:
The defendant argued that the City Civil Court at Mumbai lacked the territorial jurisdiction to entertain, try, and dispose of the suit. This issue was raised but not elaborated upon in the judgment, indicating it was not a pivotal point in the court's decision-making process.

3. Validity of the defendant's claim of having delivered blank signed cheques:
The defendant claimed that the cheques were blank and signed only as security, which the plaintiff misused. The court found this defense to be "sham and moonshine" for several reasons:
- The bill numbers were mentioned overleaf each dishonoured cheque, indicating the liability towards which it was drawn.
- Corrections in the cheques were signed by the drawer, undermining the claim of blank cheques.
- The defendant failed to provide delivery challans for admitted transactions to compare with disputed ones.

4. Proof of sale and delivery of goods:
The defendant contended that there was no proof of sale and delivery of goods. The plaintiff countered by providing delivery challans in a rejoinder. The court noted that the plaintiff's suit was based on dishonoured cheques, and under Section 118 of the N.I. Act, there is a presumption that cheques are drawn for consideration. The court found the plaintiff's evidence (delivery challans) credible and the defendant's late claim of no additional transactions beyond the admitted ones unconvincing.

5. Discrepancy in the outstanding amount claimed by the plaintiff:
The defendant pointed out discrepancies in the amounts claimed in two notices issued by the plaintiff. The court acknowledged this discrepancy but did not find it sufficient to undermine the plaintiff's overall claim, especially given the other evidence presented.

6. Justifiability of the grant of conditional leave to defend upon deposit of the amount covered by the dishonoured cheques:
The core issue was whether the City Civil Court justifiably exercised discretion in granting conditional leave to defend. The court reviewed principles from previous Supreme Court cases, emphasizing that if a defense is frivolous or sham, leave to defend should be refused. If the defense is plausible but improbable, the court may impose conditions, such as deposit of the disputed amount. The court found that the defendant's defense was plausible but improbable and upheld the conditional leave to defend upon deposit of the amount covered by the dishonoured cheques.

Conclusion:
The petition was dismissed, and the conditional leave to defend granted by the City Civil Court was upheld. The court clarified that this decision was solely about the justifiability of conditional leave and did not express any opinion on the merits of the case, which would be determined at trial. The rule was discharged, and no order as to costs was made.

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