It was a solution to a potential requirement, that of being able to patrol with a No.36-type rifle grenade loaded into the discharger cup, ready for immediate use. (Existing Australian records show the Australians and New Zealanders proposed modifications to Mills-type grenades for every imaginable operational use.)
The standard No.36 rifle grenade was loaded into the discharger cup only immediately before firing from a static position, as it was too dangerous to carry it around loaded. If the rifle caught on something or if the carrying soldier was wounded or killed, the grenade could fall out, the safety lever release, and then the grenade explode seven seconds later, to the detriment of surrounding friendly troops. This modified No.36, required a significant kick from set back to fire the igniter set*, and could be safely carried on patrol placed in the discharger - the striker was unlikely to set back if the grenade simply fell to the ground.
As Fragman points out it was only a rifle grenade and not a hand grenade, so the logistics disadvantage of having another store, especially when the 2" mortar was increasingly displacing the No.36 rifle grenade anyway, meant the modified No.36 did not progress. Also whether the set back mechanism was totally proof against a grenade falling without incident from the discharger cup was probably not confirmed.
*In WWI troops had on occasion launched No.23 rodded Mills grenades which had been stripped of pin, lever and striker spring, so using set back of the striker onto the percussion cap to set the fuze burning. The extract of a relevant order from ANZAC records is attached.