Syed Aftab Islam Shah VS Naeem Arshid

JUDGMENT SHEET

IN THE PESHAWAR HIGH COURT,

ABBOTTABAD BENCH

(Judicial Department)

R.F.A. No.19-A/2019

JUDGMENT

Date of hearing: 09.03.2026

Appellant (Syed Aftab Islam Shah) By Mr. Junaid Anwar Khan, Advocate.

Respondent (Naeem Arshid) By Mr. Dildar Ahmad Khan Lughmani, Advocate.

AURANGZEB, J.- This appeal is directed against the judgment dated 17.01.2019 passed by the learned trial court, whereby the application filed by the respondent for setting aside ex-parte judgment and decree dated 04.07.2016 was accepted.

2.In essence, the appellant/plaintiff instituted a civil suit bearing No. 14/1 of 2015 against the respondent/defendant for recovery of an amount of Rs. 20,00,000/- on the basis of cheque bearing No.4554255 dated 12.11.2012, allegedly issued by the respondent/defendant, which upon its presentation before the bank was dishonoured. The respondent/defendant was initially summoned through the prescribed form of summons; however, the same was returned with the report that he was confined in District Jail, Mansehra. Consequently, he was summoned through the Superintendent,

District Jail, Mansehra, for 23.04.2016. On the said date, he was produced in custody from jail, but owing to a note of the reader, the case was adjourned to 11.05.2016. Vide order dated 11.05.2016, a copy of the plaint was supplied to the respondent/defendant and he was directed to file an application for leave to defend, whereafter the matter was adjourned to 27.05.2016. On the adjourned date, the respondent/defendant was again required to submit the leave to defend application, however, he sought time on the ground that his counsel was busy before another court, whereupon the case was adjourned to 03.06.2016.

On the said date, the respondent/defendant was not produced from jail and the case was further adjourned to 10.06.2016. On 10.06.2016, instead of filing the leave to defend application, the respondent/defendant again sought time for the said purpose, which request was allowed and the case was fixed for 27.06.2016. On that date, the respondent/defendant informed the Court that he had not yet contacted his counsel; consequently, the matter was fixed for orders on 04.07.2016. On the said date, the learned trial Court decreed the suit in favour of the appellant/plaintiff.

Subsequently, the respondent/defendant filed an application seeking setting aside of the aforesaid judgment and decree dated 04.07.2016, which was

allowed by the learned trial Court vide judgment dated 17.01.2019, hence the instant appeal.

3.Arguments heard and record perused.

4.Before I proceed further, I may briefly consider the scheme of Order XXXVII CPC. The said order deals with summary procedure and its Rule 2 is enabling provision, which deals with the institution of summary suit. According to it, summon of the suit is to be issued first and when the defendant appears, he has to obtain leave from the Court to defend the suit. A detailed procedure for the appearance of the defendant is provided in Order XXVII Rule 3 CPC, which shows that in the matter of grant of leave to defend with condition or without condition, the Court has been given discretion in the matter of attaching condition to the grant of leave to defend. In this regard provisions of Rules 2 and 3 of Order XXXVII CPC are reproduced as under: -

“SUMMARY PROCEDURE ON

NEGOTIABLE INSTRUMENTS

1.This order shall apply only to the High Court [to the District Court and to any other Civil Court notified in this behalf by the High Court.]

2.- (l) All suits upon bills of exchange hundies or promissory notes, may, in case the plaintiff desires to proceed hereunder be instituted by presenting a plaint in the form prescribed; but the summons shall be in Form No.4 in Appendix B or in such other form as may be from lime to time prescribed.

(2)In any case in which the plaint and summons are in such forms respectively the defendant shall not appear or defend the suit unless he obtains leave from a Judge as hereinafter provided so to appear and defend; and in default of his obtaining such leave or of his appearance and defence in pursuance thereof,' the allegations in the plain/ shall be deemed to he admitted and the plaintiff shall be entitled to a decree [a) for the principal sum due on the instrument and for interest calculated in accordance with the provisions of section 79 or section 80 as the case may be of the Negotiable Instruments Act 1881 up to the date of the institution of the suit or for the sum mentioned in the summons whichever is less and for interest up to the date of the decree at the same rate or at such other rate as the Court thinks fit; and b).for such subsequent interest If any as the Court may order under section 34 of this Code; and d) for such sum for costs as may be prescribed: Provided that if the plaintiff claims more than such fixed sum for costs the costs shall be ascertained in the ordinary way.

(3)A decree passed under this rule may be executed forthwith.

3.- (l) The Court shall upon application by the defendant give leave to appear and to defend the suit, upon affidavits which disclose such facts as would make it incumbent on the holder to prove consideration, or such other facts as the Court may deem sufficient to support the application.

(2)Leave to defend may be given unconditionally or subject to such terms as 10 payment into Court giving security, framing and recording issues or otherwise as the Court thinks fit.

(3)The provisions of section 5 of the Limitation Act 1908 (IX of 1908) shall apply 10 applications under sub-rule

4.After decree 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.

5.In any proceedings 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 he stayed until the plaintiff gives security for the costs thereof

6.The holder of every dishonoured bill of exchange or promissory note shall have the same remedies for the recovery of the expenses incurred in noting the same for nonacceptance or non-payment otherwise, by reason Of such dishonour, as he has under this Order for the recovery of the amount of such bill or note, 7. Save as provided by this Order the procedure in suits hereunder shall be the same as the procedure in suits instituted in the ordinary manner.”

5.According to Rule I of' Order XXXVII CPC, summary procedure on negotiable instruments is meant for the High Court, District Court and any other civil Court, all summary suits are instituted upon bills of exchange hundies or promissory notes on presentation of the plaint in the form prescribed.

The defendant cannot defend the suit unless he obtained leave to defend and in default of his

obtaining such leave of his appearance and defence in pursuance thereof. The allegations in the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree.

6.The above-quoted provision of sub-Rule (2) of Rule 3 enables the Court that leave to defend may be given unconditionally or subject to such terms as to payment into Court giving security, framing and recording issues or otherwise as the Court thinks fit.

7.The record available on the file reveals that the appellant/plaintiff instituted the suit on the basis of cheque No.4554255 dated 12.11.2012, allegedly issued by the respondent/defendant, namely Naeem Arshid, in connection with a sale transaction purportedly arising out of agreement dated 13.11.2012. A careful perusal of the said agreement, however, reflects that the same was executed between the appellant, namely Syed Aftab Islam Shah, and Muhammad Arshid, whereas the respondent Naeem Arshid was not a signatory or contracting party to the said agreement. The stance of the appellant before the learned trial Court was that the respondent had issued the cheque in question in the capacity of a “partner” of Muhammad Arshid in the property business and, therefore, he was liable for the amount mentioned in the cheque. Conversely, the respondent took the

plea that the original agreement dated 13.11.2012 had subsequently been annulled by the parties thereto through an affidavit dated 04.12.2012 executed by Muhammad Arshid, whereby the entire transaction stood cancelled. According to the respondent, in consequence of the said cancellation, the appellant had returned all cheques issued in respect of the transaction, including the cheque which forms the basis of the present suit.

The respondent thus maintained that no enforceable liability subsisted against him after cancellation of the underlying transaction.

8.The respondent categorically denied the contention of the appellant that any amount remained outstanding or that any legally enforceable liability existed on the basis of the disputed cheque. He asserted that he was neither a party to the original agreement dated 13.11.2012 nor to the alleged transaction dated 12.11.2012 and that the primary agreement itself had subsequently been cancelled between the contracting parties. It is also noteworthy that although the formal summons in Form-4 of Appendix-B, C.P.C., along with a copy of the plaint, were not issued to the respondent in the prescribed manner, yet the order sheets of the learned trial Court reflect that upon his appearance before the Court he was supplied with a copy of the plaint and

was informed about the statutory period available for filing an application seeking leave to defend the suit. The respondent was also apprised of the consequences that would ensue in case of failure to file such application within the prescribed time.

The record further shows that warnings were extended to the respondent regarding the necessity of seeking leave to defend the suit. Despite such opportunities, the leave to defend application was not submitted and, ultimately, the impugned decree was passed against the respondent on account of non-submission of the said application. It is settled law that under Order XXXVII Rule 4 C.P.C, the Court is vested with discretionary authority to set aside a decree passed under the summary procedure where special circumstances exist. The Court may, under such circumstances, stay or set aside the execution of the decree and grant leave to the defendant to appear and defend the suit on such terms as may appear just and reasonable. In the present case, since the decree was passed solely on account of failure of the respondent to file leave to defend, the plea raised by the respondent for setting aside the decree clearly falls within the purview of Rule 4 of Order XXXVII C.P.C.

9.According to the respondent, he was not an active participant in the original transaction and, therefore, could not be saddled with any direct

liability or obligation towards the appellant. He further contended that the entire transaction between the appellant and Muhammad Arshid had been cancelled owing to the alleged failure on the part of the appellant to fulfill the terms of the agreement and, consequently, no financial liability remained enforceable against him. The respondent further explained that the cheque in question had been delivered merely in the capacity of a partner of Muhammad Arshid as part of the sale consideration contemplated under the agreement, which also included a cash component amounting to Rs. 85,00,000/-. It is also of significance that the appellant had lodged FIR No.851 dated 16.08.2013 under Section 489-F P.P.C at Police Station City, Mansehra against the respondent and Muhammad Arshid on the same set of allegations. However, vide order dated 14.09.2018 the accused persons were acquitted in the said criminal case under Section 249-A Cr.P.C. Learned counsel for the respondent further argued that during the course of criminal proceedings the appellant himself appeared as a witness and acknowledged that the agreement between the parties had been cancelled and that no subsisting liability remained against the respondent in respect of the disputed cheque.

Against the said order, the appellant filed Cr.A.No.176-A/2018 before this court and the said

appeal was dismissed by this court on even date.

Moreover, it has also come on record that the appellant instituted another civil suit bearing No.

362/1 of 2015 on the basis of a side-note contained in the affidavit/agreement deed dated 04.12.2012, which suit was dismissed by the learned Civil Judge-V, Mansehra vide order dated 20.10.2018.

Furthermore, the appellant had also instituted Civil Suit No.15/1 of 2015 against Muhammad Arshid on the basis of the same transaction and agreement dated 13.11.2012, wherein the leave to defend application of the defendant was accepted by the learned Court and the matter was treated as involving triable issues, whereafter the case was fixed for recording of pro and contra evidence.

These circumstances prima facie demonstrate that the controversy arising out of the alleged transaction is not free from dispute and involves several factual questions requiring proper adjudication after recording evidence.

10.It is an established principle that the provisions of Rule 4 of Order XXXVII C.P.C become applicable where a decree has been passed without the defendant being granted leave to appear and defend the suit. Under the said provision, the defendant seeking annulment of the decree must demonstrate the existence of special circumstances which justify the exercise of the

Court’s discretionary power. More importantly, the defendant must disclose facts constituting a plausible and bona fide defence so as to enable the Court to conclude that denial of an opportunity to contest the suit would result in miscarriage of justice. In the present case, the issue of leave to defend was never adjudicated on merits. The expression “special circumstances” occurring in Rule 4 of Order XXXVII C.P.C has been interpreted by superior courts to include circumstances relating not only to procedural impediments but also to the merits of the defence itself, which standard is comparatively stricter than the concept of “sufficient cause”. In the case in hand, it is an admitted position that the respondent was confined in jail in connection with the criminal case arising out of the same transaction and repeatedly requested that his counsel be contacted and produced. The impugned decree was admittedly passed during the period of his confinement. In such circumstances, the limited ability of the respondent to effectively pursue his defence cannot be ignored. The fact that he remained behind the bars and could not properly consult his counsel constitutes a circumstance which materially affected his ability to comply with the procedural requirement of filing leave to defend within the stipulated time. In view of these circumstances, the Court is persuaded to hold that

the respondent succeeded in demonstrating the existence of special circumstances warranting the setting aside of the decree so that the dispute between the parties may be adjudicated on merits after providing reasonable opportunity to both sides.

11.The question of limitation was also vigorously argued by the learned counsel for the parties. In this regard, it is by now a well-settled proposition of law that the provisions of Order XXXVII Rule 4 C.P.C operate independently and, in appropriate circumstances, take the matter outside the strict rigour of the Limitation Act insofar as the powers of the Court to set aside a decree passed under the summary procedure are concerned. The essential requirement under Rule 4 is the demonstration of “special circumstances” justifying the annulment of the decree. The august court in another case titled Shahid Pervaiz alias Shahid Hameed versus Muhammad Ahmad Ameen (2006 SCMR 631) has held that:-

"The Order XXXVII is a special provision having special procedure prescribed under Order XXXVII, C.P.C. Order XXXVII, rule 4, C.P.C. provides a remedy to the petitioner/ defendant to file an application for setting aside ex parte decree. The Legislature in its wisdom used the word special circumstances in Order XXXVII, rule 4, C.P.C. is higher in decree than the words `sufficient cause' and `good cause' shown under the various rules of Order IX, C.P.C. The excuse shown by the

petitioner's/defendant's. counsel in his affidavit that he was unable to appear before the Court in order to see his ailing relation could not be considered as a `special circumstance' whereupon an application under Order XXXVII, rule 4, C.P.C. could be allowed. Term `special' in Webster's New International Dictionary (2nd Edition) is defined as distinguished by some unusual quality, uncommon, noteworthy, extraordinary, as a special occasion, especially distinguished by superior excellence, importance, power, or the like. In the shorter Oxford English Dictionary on historical principles term `special' is defined as of such a kind as to exceed or excel in some way that which is usual or common, exceptional in character quality or decree. The Concise Oxford English Dictionary says that `special' means of a particular kind, peculiar in general. Therefore, under rule 4, C.P.C., the petitioner/defendant is obliged to explain the 'special circumstances' which prevented him from appearing in the Court to seek leave to appear and defend the suit within time or other 'special circumstances' which may authorize the Court to set aside the decree already passed by it. Rule 4, C.P.C. is intended to. prevent in justice. In the present case, no special circumstances have been shown for entitling the petitioner/ defendant to claim benefit of rule 4, C.P.C. Facts in the case depict it as a clear case of sheer negligence in the conduct of the defence."

12.Consequently, the application seeking setting aside of such decree is not governed by Article 164 of the Limitation Act. Rather, the matter falls within the ambit of Article 181 of the Limitation Act, which prescribes a limitation period of three years from the date when the right to apply accrues or from the date of knowledge. In the present case, the respondent was produced from Jail before the

learned trial Court and the impugned decree was passed on 04.07.2016. The respondent subsequently filed the application for setting aside the decree on 02.06.2018, which clearly falls within the period of three years prescribed under Article 181 of the Limitation Act. In this regard reliance is placed on the judgment of Sindh High Court delivered in case titled Tahir A. Khan versus Messrs United Air Travels Ltd and others (2004 YLR 416 Karachi), wherein it was held that:- “One of the grounds on which the District Judge dismissed the application under Order 37, rule 4, C.P.C. filed by Tahir Khan was that it was barred by limitation as it had been filed after expiry of 30 days from the date of the passing of the decree. No period of limitation has been provided in the Limitation Act for filing an application under Order 37, rule 4; consequently, Article 181 of the Limitation Act which provides a period of three years is applicable in respect of such an application (Habib Bank Limited v. Musarat Ali Khan PLD 1987. Karachi 86, 95). Accordingly, it is held that application under Order 37, rule 4, C.P.C. filed by defendant No.2 was within time.”

Further reliance is placed on the judgment of Lahore High Court rendered in case titled Mst.Tahira Taj versus Hakim Shah (2011 CLC 950 Lahore), wherein it was held that:- “11. As far as the limitation for filing the application for setting aside decree in a suit under Order XXXIX is concerned, the application under the special procedure for setting aside the decree even on merit is maintainable under Order XXXVII, Rule 4, C.P.C. which is read as under:-

"4. Power to set aside decree.-- After decree 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."

12.Under the above provision, the learned trial Court even can set aside a decree passed on merits if the applicant succeeded to prove that there are special circumstances for setting aside the decree. Under the above provision of law the learned trial court enjoy the powers to allow application for leave to appear and defend the suit where the decree has been passed. Needless to mention that the application under the above rule is covered by Article 181 of the Limitation Act, 1908 and thus the G period for filing the application is three years.

13.The, facts of the above said case will show the point required for consideration was whether the amount claimed by the respondent is based on money lending without permission by the Competent Authority which the learned trial Court has failed to consider. In the above circumstances the petitioner has successfully made out case of special circumstances under Order XXXVII, Rule 4, C.P.C. and as such the petitioner's application was well within time.”

Reliance is also placed on the judgment of Islamabad High Court delivered in case titled Hameed Ullah versus Ali Arshad and another (2022 CLC 340 Islamabad), wherein it was held that:-

“7. The controversy raised in the instant petition is spelt out in the preceding paragraphs, hence need not be reproduced. As noted above, the application for recalling of ex parte judgment and decree dated 02.02.2019 was dismissed by the learned Trial Court

on the basis that the applicable Article is 164 of Schedule-I to the Act and under the same the limitation period is 30 days from the passing of the judgment and decree or knowledge of the same. It is pertinent to observe that the petitioner did not make any request for condonation of delay. Under Order XXXVII, Rule 4, C.P.C., after the decree is passed the Court under special circumstances can set aside the same and also stay or set aside the execution if it seems reasonable to the Court to do so provided there are special circumstances showed to the satisfaction of the Court; in parallel ex parte judgment and decree may also be recalled or set aside under Order IX, Rule 13, C.P.C. In a normal course of event a suit which is under Order XXXVII, C.P.C., under the referred provision of law a judgment and decree is to be set aside where the applicant shows to the satisfaction of the Court that summons were not duly served or that he was prevented by any sufficient cause from appearing when the suit was called for hearing. It is settled law that an application filed under Order IX, Rule 13, C.P.C., the applicable Article to govern the limitation under which the application for recalling of the order is made, is Article 164 ibid in which the period, as observed hereinabove, is 30 days from the date of the decree or the knowledge of the same. Whereas for application under Order XXXVII, Rule 4, C.P.C., no period of limitation is provided under the Act and where such is the case the governing Article is 181 of Schedule-I to the Act which provides that where no specific period for limitation is provided for any application then the same shall apply and the period of limitation shall be three years.

8.In the instant case the moot point is whether an application for setting aside ex parte judgment and decree is to be treated as one under Order IX, Rule 13, C.P.C., or Order XXXVII, Rule 4, C.P.C. It is trite law that where there is a special provision and general provision for some action to be taken then the special shall prevail over the general. This principal has been qualified in the context of Order XXXVII, C.P.C., by the Courts by observing that where application for leave to defend is allowed and the defendant contest the suit

but absent himself and the suit proceeds like a normal suit after recording of evidence then the governing provision of law is Order IX, Rule 13, C.P.C; however, if summons arc not properly served or any application for leave to defend is made and ex parte judgment and decree is passed the applicable provision is Order XXXVII, Rule 4, C.P.C. Reliance is placed on the case titled Raees Ahmad Pahalwan v. Nayab Cinema (1990 ALD 763) and Shahnawaz v. Adwise (Pvt.) Limited through Chief Executive (2003 YLR 2724) in which the Hon'ble Lahore High Court observed that where the application for leave to defend was dismissed for non- prosecution and application for restoration of the leave application and setting aside ex parte judgment and decree was made the same shall be governed under Order XXXVII, Rule 4, C.P.C., and the period of limitation would be governed under Article 181 of Schedule I to the Act. Similarly in Naseer Ahmad v. Muhammad Mushtaq (2006 MLD 1936) it was observed that the period of limitation applicable for an application under Order XXXVII, Rule 4, C.P.C., is three years under Article 181 ibid. In Shahid Pervaiz Alias Shahid Hameed v. Muhammad Ahmad Ameen (2006 SCMR 631) it was held that in the circumstances where the defendant joined proceedings before the learned Trial Court in the suit under Order XXXVII, C.P.C., but on his absence afterwards ex parte judgment and decree was passed the relevant governing Article for limitation for such application would be 164 of the Act. In Habib Bank Limited v. Mussarat Ali Khan (PLD 1987 Karachi 86) the Hon'ble Sindh High Court held that in a summary suit where ex parte judgment and decree is passed the provision of Order IX, Rule 13, C.P.C., was not applied and the relevant application for recalling ex parte judgment and decree would be Order XXXVII, Rule 4, C.P.C. It was further observed that even where a wrong provision of law has been mentioned in the caption of the application, the same could not be struck down on the basis thereof. The Hon'ble Court further added that the limitation for filing such application is under Article 181 of the Act.”

13.Thus, the application cannot be said to be barred by limitation. In these circumstances, the findings recorded by the learned trial Court appear to be based upon proper appreciation of law as well as the factual matrix of the case and do not suffer from any material illegality or irregularity warranting interference by this Court in exercise of its appellate jurisdiction.

14.For the reasons discussed hereinabove, this Court finds no illegality, perversity or jurisdictional defect in the impugned judgment passed by the learned trial Court. The respondent has been able to demonstrate the existence of special circumstances within the meaning of Order XXXVII Rule 4 C.P.C, justifying the setting aside of the decree so that the dispute between the parties may be decided on merits after providing adequate opportunity of defence. Consequently, the instant appeal being devoid of merit is hereby dismissed.

Announced.

JUDGE

Aftab PS/* (S.B) Hon’ble Justice Aurangzeb