Jammu & Kashmir and Ladakh High Court Sets Aside Trial Court's Decision, Restores Suit for Recovery of Rs. 5 Lakh Loan
In a significant judgment, the Jammu & Kashmir and Ladakh High Court has overturned a decision by the Additional District Judge, Budgam, which had dismissed a money recovery suit initiated by Sheikh Ghulam Hassan against Mohammad Amin Dar. The High Court, presided over by Justice Shahzad Azeem, found that the trial court erred in rejecting the plaint under Order 7, Rule 11 of the Civil Procedure Code (CPC) and directed that the suit be tried as an ordinary money recovery case.
The dispute arose when Hassan extended a friendly loan of Rs. 5 lakh to Dar, who issued a cheque for Rs. 4 lakh as part payment. The cheque, however, was never presented for encashment due to an assurance of cash payment by Dar, which led to its expiry. When the payment was not forthcoming, Hassan filed a summary suit under Order XXXVII of CPC to recover the amount.
The trial court had dismissed the suit, asserting that since the cheque was never presented, no cause of action arose under Order XXXVII. However, the High Court found that the underlying debt, evidenced by the cheque, constituted a legitimate cause of action for a regular suit. It emphasized that the rejection of a suit under Order 7, Rule 11 CPC should only occur when no cause of action is disclosed.
Justice Azeem, exercising the Court's supervisory jurisdiction under Article 227 of the Constitution of India, reinstated the suit and directed that it proceed as an ordinary suit for recovery of the ?5 lakh loan. The High Court's decision highlights the importance of preserving a plaintiff's claim for adjudication on merits rather than dismissing it prematurely, especially when serious triable issues are raised.
The parties have been directed to appear before the trial court on September 7, 2026, with Dar given four weeks to file a written statement. This judgment underscores the courts' duty to ensure that justice is served by allowing genuine disputes to be resolved through a fair trial.
Bottom Line :
A suit under Order XXXVII CPC based on a cheque is maintainable only when the cheque has been presented and dishonored. However, if the plaint discloses a cause of action for a regular money recovery suit based on an underlying loan transaction, it should not be rejected outright under Order 7, Rule 11 CPC. Instead, the suit should be converted into an ordinary money recovery suit for adjudication on merits.
Statutory provision(s): Order XXXVII CPC, Order 7, Rule 11 CPC, Article 227 of the Constitution of India
