Conditional Leave to Defend and Documentary Evidence

In Muhammad Waseem vs. Maple Leaf Cement Factory Limited (2024 LHC 3895), the Lahore High Court addressed an appeal challenging an ex-parte judgment and decree passed by the Additional District Judge, Mianwali. The Court examined whether the appellant was properly given the opportunity to defend the suit and whether the failure to submit a surety bond, as required by the trial court, justified the ex-parte judgment.

Background:

The respondent, Maple Leaf Cement Factory Limited, filed a suit for recovery of Rs. 70,000,000 under Order XXXVII of the Code of Civil Procedure (CPC), claiming that the appellant, Muhammad Waseem, misappropriated Rs. 79,617,591 through criminal breach of trust. An FIR was also registered against the appellant. During settlement negotiations, the respondent agreed to write off part of the claim, and the appellant issued a cheque for the remaining amount. However, the cheque was dishonored, leading to legal proceedings.

The appellant sought leave to defend the suit but was required by the trial court to submit a surety bond backed by immovable property equal to the cheque amount. The appellant failed to submit the bond, leading to ex-parte proceedings and a decree in favor of the respondent.

Key Issues:

Opportunity to Defend and Surety Bond Requirement: Whether the trial court's condition requiring a surety bond for leave to defend was justified, and whether the failure to submit the bond justified proceeding ex-parte.

Validity of Ex-Parte Judgment: Whether the trial court's ex-parte judgment was valid, particularly given the respondent’s limited evidence and the appellant's claims of financial incapacity.

Relevance of Documentary Evidence: Whether the respondent's failure to provide complete documentary evidence, particularly regarding the relationship between the parties, affected the validity of the judgment.

Court’s Analysis:

Conditional Leave to Defend: The Court emphasized that leave to defend can be granted subject to conditions such as the submission of a surety bond, particularly in summary suits under Order XXXVII of the CPC. However, it also acknowledged the appellant's claim of financial incapacity at the time. Given that the appellant expressed willingness to submit the surety bond now, the Court considered this sufficient to grant conditional relief.

Validity of the Ex-Parte Judgment: The Court noted that while the ex-parte judgment was procedurally valid due to the appellant’s non-compliance with the bond requirement, the respondent had only submitted limited documentary evidence, which primarily consisted of the cheque, an FIR, and a company board resolution. The Court highlighted that no clear business relationship or contract was established between the parties, raising doubts about the sufficiency of evidence.

Relevance of Documentary Evidence: The Court observed that the respondent had failed to produce a contract or agreement that demonstrated a clear relationship between the appellant and the respondent. This lack of key evidence was critical, as the Court stated that summary suits require clear documentation of obligations between parties.

Court’s Conclusion: The Lahore High Court allowed the appeal, setting aside the ex-parte judgment and decree. It accepted the appellant’s petition for leave to defend the suit, subject to the furnishing of a surety bond backed by immovable property for 50% of the cheque amount. The case was remanded to the trial court for fresh proceedings, and both parties were directed to present additional evidence. The trial court was ordered to resolve the case within four months.

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