Chapter 1: Introduction

Common prototypes of bills of exchanges and promissory notes originated in China. Here, in
the 8th century during the reign of the Tang Dynasty they used special instruments called
feitsyan for the safe transfer of money over long distances. Later such document for money
transfer used by Arab merchants, who had used the prototypes of bills of exchange – suftadja
and hawala in 10–13th centuries, then such prototypes had used by Italian merchants in the
12th century. In Italy in 13–15th centuries bill of exchange and promissory note obtain their
main features and further phases of its development have been associated with France (16–
18th centuries, where the endorsement had appeared) and Germany (19th century,
formalization of Exchange Law). In England (and later in the U.S.) Exchange Law was
different from continental Europe because of different legal systems1.

A "promissory note" is an instrument in writing (not being a bank-note or a currency-note)

containing an unconditional undertaking signed by the maker, to pay a certain sum of money
only to, or to the order of, a certain person, or to the bearer of the instrument2.

The Madhya Pradesh High Court in the case Bhismat Pandey v. Phoola 3, while considering
the distinction between promissory note and bond laid down the essentials of a promissory
note as under:

(1) An unconditional undertaking to pay;

(2) The sum should be a sum of money and should be certain;

(3) The payment should be to the order of a person who is certain, or to the bearer of the
instrument; and

(4) The maker should sign it.

The most common civil remedy for recovery of money is Order 37 of the Civil Procedure
Code which allows a creditor to file a summary suit. Compared to normal suits summary suits
are disposed of faster. Once the suit is instituted and the summons are issued, the defendant
has 10 days to make appearance before court, failing which court assumes the plaintiff’s

1
Justice Y Srinivasa Rao, ‘A brief note on promissory note’, Legal Service India, via
http://www.legalservicesindia.com/article/article/promissory-note-in-india-1590-1.html accessed on 27.4.16.
2
Section 4 of the Negotiable Instruments Act, 1881 defines “promissory note”
3
AIR 2010 MP 147
allegations to be true and accordingly award plaintiff. The summary suit applies to all suits
for recovery of money that arise from written agreements. This could be promissory notes,
contracts, bills of exchange or cheques so long as plaintiff seeks to recover specific debt.
Where matter is however to recover pending dues concerning penalties or any other uncertain
amount, one cannot file a summary suit4.

Chapter 2: Provisions related to recovery of money through promissory note

Summary Suits are contemplated under Order XXXVII (Order 37) of Civil Procedure Code
of 1908, a very powerful and expeditious remedy provided under the law for recovering
money, which is routinely trapped in commercial transactions and in contracts.

As observed by Gujrat High Court- “The sheer purpose of enacting Summary Suits is to give
impetus to commerce and industry by inspiring confidence in commercial population that
their causes in respect of money claims of liquidate amounts (ascertained amount) would be
expeditiously decided and their claims will not hang on for years blocking their money for a
long period5. The underlying public policy behind Order 37 is the expeditious disposal of
suits of commercial nature6.

The procedure contemplated by Order 37 of CPC constitutes a clear departure from usual
procedure prescribed under the CPC. According to usual procedure, every defendant has a
right to defend his case in the manner best suited to him. The Summary procedure is a
powerful weapon in the hands of Court to shut out frivolous defences which are raised in
commercial causes with a view to prolong the litigation7. The provisions of this Order 37 are
enacted to ensure that the defendants doesn’t prolong the litigation by raising untenable and
frivolous defences8. In other words Order 37 has been enacted by Parliament to discourage
litigants from coming forward with untenable pleas with the object of delaying admitted
liabilities and prolonging the inevitable decree9.

SUMMARY PROCEDURE:

4
Sakina Babwani, How to recover your pending dues, Economic Times India, March 2013 available at
http://articles.economictimes.indiatimes.com/2014-03-10/news/48083988_1_cheque-amount-dues-summary
accessed on 27.4.16.
5
Navinchandra Babulal Bhavsar versus Bachubhai Dhanabhai Shah AIR 1969 Gujrat 124 (128) DB.
6
Bankyag B G Agarawal versus Bhagwanti Mehji 2001 (1) Bom LR 823 (DB)
7
Kocharabhai ishwarbhai patel versus Gopal bhai C patel AIR 1973 Gujrat 29 (31)
8
K R Kesavan versus The South Indian Bank Ltd AIR (37) 1950 Madras 226 (228) DB
9
Dena Bank versus M/s Gladstone Lyall & Co 87 Bombay Law Reporter 477 (480).
ORDER XXXVII of the Code reads as follows:

1. Courts and classes of suits to which the Order is to apply

(1) This Order shall apply to the following Court, namely:-

(a) High Courts, City Civil Courts and Courts of Small Causes; and

(b) other Courts;

Provided that in respect of the Courts referred to in clause (b), the High Court
may, by notification in the Official Gazette, restrict the operation of this Order
only to such categories of suits as it deems proper, and may also, from time to
time, as the circumstances of the case may require, by subsequent notification
in the Official Gazette, further restrict, enlarge or vary, the categories of suits
to be brought under the operation of this Order as it deems proper.

(2) Subject to the provisions of sub-rule (1) the Order applies to the following
classes of suits, namely:-

(a) suits upon bills of exchange, hundies and promissory notes;

(b) suits in which the plaintiff seeks only to recover a debt or

liquidated demand in money payable by the defendant, with or without
interest, arising,-

(i) on a written contract, or

(ii) on an enactment, where the sum sought to be recovered is a

fixed sum of money or in the nature of a debt other than a
penalty; or

(iii) on a guarantee, where the claim against the principal is in

respect of a debt or liquidated demand only.
The scope of the rule has been amended by the amendment of 1976. Adopting the Bombay
Amendment, summary procedure has been made applicable to all courts.

The Code of Civil Procedure, 1908 provides for a summary procedure in respect of
certain suits. Provisions relating to summary procedure are found in O. 37, Rules 1 to 7 of the
Code. A Summary suit is intended to facilitate the speedy disposal of cases. The object that
underlies the summary procedure is to guard against delaying tactics that are indulged in by a
defendant, who may have no genuine defence. In short, the essence of summary suits is that
the defendant is not, as in an ordinary suit, automatically endowed with the right to defend a
suit. The right to exercise his defence will be granted to the defendant only if the court is
convinced as to the authenticity of his claims. The summary procedure is a powerful weapon
in the hands of a court to discourage frivolous defences.

The important feature of "summary suit", is that, here the Defendant is not allowed to
defend the suit, unless he takes the permission from court. Defendant is allowed to defend
himself only if according to the affidavit filed by him, it is must for the plaintiff to prove
charges against him.

If by affidavit by Defendant, it appears that he has no defense, then court will decline him the
permission and pass necessary orders in favor of plaintiff.

KINDS OF SUITS:

1. Suits upon bills of Exchanges, hundies or promissory notes;

2. Any suit filed by the plaintiff for recovery of a debt / money payable by the defendant
according to a written contract, or
3. In case of an enactment wherein the amount to be recovered is a fixed amount of
money, or a debt other than a penalty, or A guarantee, where the claim against the
principal is in respect of a debt or for money only.

The object behind provision of summary procedure was to ensure a speedy trial for recovery
of money in cases where the defendant has no defence and thus any unreasonable delay
sought to be caused is eliminated.

THE CONSTITUTIONALITY AND SCOPE:

The provisions of this Order, prescribing for the special trail of certain classes of suits, and by
certain courts, are not repugnant to Article 14 of the Constitution, as they are based on
reasonable classification10. Rule 8 made under the Bombay Rents Hotels and Lodging Hall
Rates (Control) Act 1947 provides that ejectment suits may be instituted in accordance with
O 37 is not ultra vires11.

 Promissory Notes, Bills of Exchange and Hundis.

The Order applies on the promissory notes, bills of exchange and hundis. The Negotiable
Instruments Act under ss 4 and 5 define a ‘promissory note’ and a ‘bill of exchange’.
However, neither the Negotiable Instruments Act nor the Code defines the term Hundi.

 Account Payee Cheques.

The rule is applicable to all suits on bills, hundis and promissory notes, whether they are
negotiable or not. Thus, a suit based on a crossed cheque bearing an endorsement ‘a/c payee
only’ can be filed under the summary procedure12.

 Debt or Liquidated Demand.

A debt is a present obligation to pay an unascertainable sum of money whether the amount is
payable in presenta or in futuro. The former is a debt owing and the latter is a debt due.
However, a sum payable upon a contingency does not become a debt until the said
contingency has happened13.

‘Liquidate demand’ means an amount susceptible of being made certain by

mathematical calculation from factors in possession or knowledge of the party to be charged.
A claim of damages in percentage is a liquidated amount within the meaning of O 3714.

10
Cf Khemchand v. Hari AIR 1979 Del 7.
11
Ramkarandas v. Bhagwaandas AIR 1965 SC 1144.
12
Tailors Priya v. Gulabchand AIR 1963 Cal 36.
13
Kesoram Industries v. Gheesi AIR 1999 Raj 69.
14
Rajinder Kumar Khanna v. Oriental Insurance Co. AIR 1990 Del 278.
INSTITUTION OF SUMMARY SUITS.

Order 37 rule 2 deals with the institution of summary suits.

2. Institution of summary suits

(1) A suit, to which this Order applies, may if the plaintiff desires to proceed
hereunder, be instituted by presenting a plaint which shall contain,-

(a) a specific averment to the effect that the suit is filed under this Order;

(b) that no relief, which does not fall within the ambit of this rule, has been
claimed in the plaint;

(c) the following inscription, immediately below the number of the suit in the
title of the suit, namely:-

"(Under Order XXXVII of the Code of Civil Procedure, 1907)."

(2) the summons of the suit shall be in Form No. 4 in Appendix B or in such other
form as may, from time to time, be prescribed.

(3) The defendant shall not defend the suit referred to in sub-rule (1) unless he enters
an appearance and in default of his entering an appearance the allegations in the plaint
shall be deemed to be admitted and the plaintiff shall entitled to a decree for any sum,
not exceeding the sum mentioned in the summons, together with interest at the rate
specified, if any, up to the date of the decree and such sum for costs as may be
determined by the High Court from time to time by rules made in that behalf and such
decree may be executed forthwith.

This rule provides that after the summons of the suit has been issued to the defendant, the
defendant must appear and the plaintiff will serve a summons for judgment on the defendant.
The defendant is not entitled to defend a summary suit unless he enters an appearance. In
default of this, the plaintiff will be entitled to a decree which will be executed forthwith.
  Failure to Enter Appearance:
As provided by sub-rule(3), in a summary suit, if the defendant fails to enter appearance, the
court can pass a decree on the basis that allegations in the plaint are deemed to have been
admitted15.

 Form of summons in a Summary Suit:

The summons in a summary suit requires the defendant to obtain leave from the court within
ten days from the service thereof to appear and defend the suit and within such time to cause
an appearance to be entered on his behalf.

 Limitation for Application for Leave to Defend:

The period for an application for leave to appear and defend is ten days from the date when
the summons is served. The court has no power to extend the time16, unless the court has, by
a rule framed in that behalf, made s 5 of the Limitation Act applicable to such applications as
done by the High Court of Bombay.

It has been held in some decisions of Madras High Court that a court could entertain,
for sufficient cause, an application presented beyond ten days, as a power to excuse delay
should be implied from the power to set aside an ex parte decree for sufficient cause, under
rule 417.

But most of the authorities hold the view that there is no power in the court to excuse
delay, as section 5 of the Limitation Act is inapplicable18.

 Obtaining Leave is Must:

Before the amendment of 1976, this rule provided that a defendant who has failed to obtain a
leave to defend can not be allowed to appear while the hearing is proceeding. But the scheme

15
Vijaya Home Loans Ltd. V. Crown Traders Ltd., AIR 1998 Del 183.
16
Mahmudar v. Saratchandra (1900) 5 CWN 259.
17
Murahari Rao v. Bapayya AIR 1949 Mad 742.
18
Kamalammu v. Venkata Sastri (1951) 1 MLJ 676, AIR 1951 Mad 895.
after the amendment is different. The defendant must enter an appearance and thereafter he
has to seek leave to defend.

PROCEDURE FOR THE APPEARANCE OF DEFENDANT:

3. Procedure for the appearance of defendant

(1) In a suit to which this Order applies, the plaintiff shall, together with the summons
under rule 2, serve on the defendant a copy of the plaint and annexures thereto and the
defendant may, at any time within ten days of such service, enter an appearance either
in person or by pleader and, in either case, he shall file in Court an address for service
of notices on him.

(2) Unless otherwise order, all summonses, notices and other judicial processes
required to be served on the defendant, shall deemed to have been duly served on him
if they are left at the address given by him for such service.

(3) On the day of entering the appearance, notice of such appearance shall be given by
the defendant to the plaintiffs pleader, or, if the plaintiff sues in person, to the plaintiff
himself, either by notice delivered at or sent by pre-said letter directed to the address
of the plaintiffs pleader or of the plaintiff, as the case may be.

(4) If the defendant enters an appearance, the plaintiff shall thereafter serve on the
defendant a summons for judgment in Form No. 4A in Appendix B for such other
Form as may be prescribed from time to time, returnable not less than ten days from
the date of service supported by an affidavit verifying the cause of action and the
amount claimed and stating that in his belief there is no defence to the suit.

(5) The defendant may, at any time within ten days from service of such summons for
judgment, by affidavit or otherwise disclosing such facts as may be deemed sufficient
to entitle him to defend, apply on such summons for leave to defend such suit, and
leave to defend may be granted to him unconditionally or upon such terms as may
appear to the Court or Judge to be just:
 Provided that leave to defend shall not be refused unless the Court is satisfied that the
facts disclosed by the defendant do not indicate that he has a substantial defence to
raise or that the defence intended to be put up by the defendant is frivolous or
vexatious:

Provided further that, where a part of the amount claimed by the plaintiff is admitted
by the defendant to be due from him, leave to defend the suit shall not be granted
unless the amount so admitted to be due is deposited by the defendant in Court.

(6) At the hearing of such summons for judgment,-

(a) if the defendant has not applied for leave to defend, or if such application
has been made and is refused, the plaintiff shall be entitled to judgment
forthwith; or

(b) if the defendant is permitted to defend as to the whole or any part of the
claim, the Court or Judge may direct him to give such security and within such
time as may be fixed by the Court or Judge and that, on failure to give such
security with the time specified by the Court or Judge or to carry out such
other directions as may have been given by the Court or judge, the plaintiff
shall be entitled to judgment forthwith.

(7) The Court or Judge may, for sufficient cause shown by the defendant, execute the
delay of the defendant in entering an appearance or in applying for leave to defend the
suit.

This rule prescribes the mode of service of summons and leave to defend. The defendant
must apply for leave to defend within ten days from the date of service of summons upon him
and such leave will be granted only if the affidavit filed by the defendant discloses such facts
as may be deemed sufficient to entitle him to defend. Such leave may grant to him
unconditionally or upon such terms as may appear to the court or judge to be just19. Leave to
defend, however, should not be refused unless the court is satisfied that the facts disclosed by

19
Mechalec Engineers v. Basic Equipment Corpn., (1976) 4 SCC 687.
the defendant do not indicate that he has substantial defence to rise or that the defence
intended to be put by him is frivolous or vexatious.

 Sub-rule(5):
As a rule, leave to defend must be given unconditionally if the defendant shows a prima facie
case or raises a triable issue. Leave should be made conditional if the court doubts the bona
fides of defendant or thinks that the defence is put in only in order to gain time20. The Madras
High Court has held that if the defendant sets up a defence which if proved would entitle him
to succeed, the court has no discretion but must grant leave unconditionally21.

In the Santosh Kumar v. Mool Singh22, the Supreme Court approved the decision of
Sundaram v. Vallimal23 held that once it was found that there was a triable issue, leave should
be given.

 Discretion:
After the amendment of 1976, the discretion to give leave to defend is delineated by the
provisios. Order 37, rule 3(5) provides that leave to defend shall not be refused unless the
court is satisfied that there is absence of substantial defence, or the defence is frivolous or
vexatious.

Following principles are to be followed, while touching upon the issue of granting
leave:

1. If the defendant satisfies the court that he has a good defence to the claim on its
merits, the plaintiff is not entitled to leave to sign judgment and the defendant is
entitled to unconditional leave to defend.
2. If the defendant raises a triable issue indicating that he has a fair or bona fide or
reasonable defence (although not a positively good defence), the plaintiff is not
entitled to sign judgment and defendant is entitled to unconditional leave to defend.

20
Santosh v. Moolsingh AIR 1958 SC 321.
21
Sunderam v. Valli Ammal (1935) ILR 58 Mad 116, 152 IC 687.
22
AIR 1958 SC 321.
23
(1935) ILR 58 Mad 116, 152 IC 687.
 3. If the defendant discloses such facts as may be deemed sufficient to entitle him to
defend, the plaintiff is not entitled to judgment and the defendant is entitled to leave to
defend, but, in such a case, the court may, in its discretion, impose conditions as to the
time or mode of trial, but not conditions as to payment into court or furnishing
security.
4. If the defendant has no defence or the defence set up is illusory or shown to be
practically moonshine, then ordinarily the plaintiff is entitled to leave to sign
judgment and the defendant is not entitled to leave to defend.

 Sub-rule (7)
Under rule 3(7), time cannot be given until the defendant enters appearance. For leave to
defend in a summary suit for recovery of money, the defendants must show that they have
substantial defence and triable issues to raise, and that their defence is not frivolous. Only
copy of plaint and annexure thereto has to be furnished to defendants. Furnishing of copies
of document which are the basis of the suit is not necessary. Defendant would not be entitled
to leave to defend on the ground of non-furnishing of copies.

The expression ‘within ten days’ may mean that the period may be less than ten days
or, at the most, on the tenth day. But it cannot go beyond that.

POWER TO SET ASIDE DECREE.

4. Power to set aside decree

After decree for the Court may, under special circumstances set aside the decree, and
if necessary stay or set aside execution, and may give leave to the defendant to appear
to the summons and to defend the suit, if it seems reasonable to the Court so to do,
and on such terms as the Court thinks fit.

Under this rule, the court can set aside the decree and stay the execution and may grant leave
to the defendant to appear and defend the suit.

POWER TO ORDER BILL, ETC., TO BE DEPOSITED WITH OFFICER OF

COURT.
In any proceeding under this Order the Court may order the bill, hundi or note on which the
suit is founded to be forthwith deposited with an officer of the Court, and may further order
that all proceedings shall be stayed until the plaintiff gives security for the costs thereof24.

PROCEDURE IN SUITS.

Save as provided by this Order, the procedure in suits hereunder shall be the same as the
procedure in suits instituted in the ordinary manner25.

DIFFERENCE BETWEEN SUMMARY SUIT AND ORDINARY SUIT:

1. In the ordinary suit the defendant is entitled to defend the suit as of right. But in a
summary suit he is not entitled for the same except with the leave of the court.
2. in an ordinary suit the decree cannot be set aside by the trial court except in review.
But in the summary suit the trial court may set it aside under special circumstances.

Chapter 3: Model Format for recovery of money under Promissory Note

24
Rule 5
25
Rule 7.