Bombay High Court
Hubtown Limited vs Idbi Trusteeship Service Limited on 24 October, 2016
Bench: Anoop V. Mohta
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL APPELLATE DIVISION OF THE HIGH COURT
COMMERCIAL APPEAL NO. 7 OF 2016
IN
SUMMONS FOR JUDGMENT NO. 111 OF 2014
IN
SUMMARY SUIT NO. 776 OF 2014
WITH
NOTICE OF MOTION (LODGING) NO. 2028 OF 2016
IN
COMMERCIAL APPEAL NO. 7 OF 2016
Hubtown Limited,
incorporated under the
Companies Act, 1956 and having
its registered office at
Hubtown Solaris, 2nd Floor,
N.S.Phadke Marg,
Opp. Telli Gully, Near Hotel
Regency, Andheri (East),
Mumbai-400 069 ...Appellant.
(Original Defendant)
Vs.
IDBI Trusteeship Service Limited,
incorporated under the
Companies Act, 1956 and having
its registered office at Asian
Building, Ground Floor, 17 Road,
Kamani Marg, Ballard Estate,
Mumbai-400 001. ....Respondent.
(Original Plaintiff)
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Mr. Janak Dwarkadas, Senior Advocate a/w Mr. Simil Purohit, Mr.
Aditya Thakkar, Mr. Nishit Dhruva, Mr. Prakash Shinde, Mr. Chirag
Bhavsar i/by MDP & Partners for the Appellant.
Mr. F. E. Devitre, Senior Advocate a/w Mr. Kunal Dwarkadas, Mr.
Verghese Thomas, Ms. Aditi V. Deshpande, Mr. Yohana Lumathawalla
i/by J. Sagar Associates for the Respondent.
CORAM : ANOOP V. MOHTA AND
G.S. KULKARNI, JJ.
RESERVED ON : 29 AUGUST 2016/17 OCTOBER 2016
PRONOUNCED ON : 24 OCTOBER 2016.
JUDGMENT (PER-ANOOP V. MOHTA, J.):-
This Commercial Appeal is filed by the Appellant-Original
Defendant against the Judgment and order dated 6 June 2016, passed
by the learned Single Judge of the Commercial Division in Summons
for Judgment whereby, refused an unconditional leave to defend and
has granted a leave to defend, but conditional.
Preliminary objection to the maintainability of Commercial Appeal.
2 To decide the preliminary objection of the maintainability
of Commercial Appeal as filed, as raised by the learned Senior Counsel
appearing for the Respondents, though the parties have consented to
hear the Appeal on merits, we have re-listed the matter for hearing on
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the maintainability as it goes to the root of the matter in view of the
confusion prevailing in the Office/Registry after the transfer of such
pending summary suits because of the provisions of The Commercial
Courts, Commercial Division and Commercial Appellate Division of
High Courts Act, 2015 (for short, "The Commercial Courts Act").
Background of proceedings-
3 The following are the background dates of the proceedings
as per the Respondent-Plaintiff (IDBI) to decide the maintainability of
the Commercial Appeal under Section 13 of the Commercial Courts
Act, apart from decision on merits.
On 11/09/14, Summary Suit No.776 of 2014 was filed by
the Respondent (Plaintiff) (IDBI) on 11 September 2014, seeking a
decree in the sum of over Rs.33 crores.
During the pendency of the Summary Suit, the
Commercial Courts, Commercial Division, Commercial Appellate
Division of High Courts Ordinance, 2015 (the Ordinance) was
promulgated on 23 October 2015 with immediate effect. The
Ordinance inter alia provided for the constitution of Commercial
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Divisions in High Courts having ordinary original civil jurisdiction.
An order/notice dated 17 November, 2015 was issued by
the then Hon'ble the Acting Chief Justice constituting the Commercial
Division and Commercial Appellate Division under Sections 4 and 5 of
the Ordinance.
The then Hon'ble Acting Chief Justice also issued an
Assignment Order dated 22 December, 2015 of the Original Side of
this Court to take effect from 4 January 2016, constituting the
Commercial Division and the Commercial Appellate Division of this
High Court and nominating Judges for the same. Mr. Justice S.C.
Gupte was nominated as the "Commercial Division" of this Court and
assigned all summary suits, i.e. including the present Summary Suit.
Assignment Order dated 22 December 2015, was the order
constituting the Commercial Division and Commercial Appellate
Division. The Commercial Courts Act does not prescribe any
particular form of the order to constitute such Divisions. The Chief
Justice is required to pass only an administrative order, not a judicial
order.
On 1 January, 2016, the Commercial Courts Act came to
be notified in the Official Gazette with effect from 23 October 2015.
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On 4 January 2016, the Commercial Divisions and the
Commercial Appellate Divisions as constituted, have commenced
functioning accordingly. On 7 January 2016, and from time to time
thereafter, the Assignment Orders were varied as under :
a) Notice dated 7 January 2016 in partial modification of
the Assignment order dated 22 December 2015.
b) Assignment order dated 3 March 2016 with effect from
7 March 2016.
c) Assignment order dated 15 March 2016 with effect
from 21 March 2016.
d) Assignment order dated 19 August 2016 with effect
from 22 August 2016.
At all relevant times, the learned Judge continued to be nominated as
the "Commercial Division" of this Court assigned to hear all summary
suits, including the present summary suit.
4 The Summons for Judgment in the Summary Suit was
argued finally on merits by the counsel for the parties before the
Commercial Division on 12 and 14 January 2016 and was reserved for
orders on 14 January 2016.
On 13 May 2016, pending the final order in the Summons
for Judgment, the captioned Summary Suit was formally transferred
by a notice issued by the High Court (along with several other suits
and proceedings) to the Commercial Divisions of this Court. The
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impugned order dated 6 June 2016 granting the conditional leave to
defend the suit was passed by the learned Single Judge.
5 On 12 July 2016, this Appeal was filed as a Commercial
Appeal before this assigned Commercial Appellate Division of this
Court. On 29 August 2016, this Appeal by consent, was heard finally
on merits at the admission stage and the matter was closed for orders.
The time to deposit has been extended till this date.
On 1 September 2016 and 16 September 2016 , this
Appeal was listed for directions and submissions on the question of
the maintainability of this Appeal.
6 Admittedly, for the Letters Patent Appeals under the
Letters Patent Act, another Division Bench has been assigned to deal
with the same. Apart from above, the submission is made that they
have already moved a praecipe for passing final order even on merits,
in either situation, by this Bench as we have already heard the matter
on merits also. The Hon'ble the Chief Justice has passed order on 14
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October 2016, accordingly.
The Commercial Courts Act-
7 To provide for the constitution of Commercial Courts,
Commercial Division and Commercial Appellate Division in the High
Courts for adjudicating commercial disputes of specified value and
matters connected therewith or incidental thereto.
It is relevant to note that Law Commission of India in its
253 Report has recommended the establishment of Commercial
Courts, the Commercial Division and the Commercial Appellate
Division in the High Courts for disposal of commercial disputes of
specified value.
9 On 23 December 2015, the Commercial Courts Act, having
retrospective effect from 23 October 2015 by repealing the ordinance
with the following rider has been promulgated-
"Section 23 - Repeal and savings.-(1) The Commercial
Courts, Commercial Division and Commercial Appellate
Division of High Courts Ordinance, 2015 (Ord. 8 of 2015)
is hereby repealed.
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(2) Notwithstanding such repeal, anything done or any
action taken under the said Ordinance, shall be deemed to
have been done or taken under the corresponding
provisions of this Act."
10 The action and/or anything done under the Ordinance, in
view of Section 23 of Commercial Courts Act, should be deemed to
have been done or taken under the corresponding provisions of the
Commercial Courts Act.
The basic concepts and terms have been elaborated are
reproduced below:-
"Section 2 - Definitions:- (1) In this Act, unless the context
otherwise requires,-
"(a) "Commercial Appellate Division" means the
Commercial Appellate Division in a High Court constituted
under sub-section (1) of section 5;"
(b) "Commercial Court" means the Commercial Court
constituted under sub-section (1) of section 3;
(c) "commercial dispute" means a dispute arising out of-
(i) ordinary transactions of merchants, bankers,
financiers and traders such as those relating to
mercantile documents, including enforcement and
interpretation of such documents;
(ii) export or import of merchandise or services;
(iii) issues relating to admiralty and maritime law;
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(iv) transactions relating to aircraft, aircraft engines,
aircraft equipment and helicopters, including sales,
leasing and financing of the same;
(v) carriage of goods;
(vi) construction and infrastructure contracts, including
tenders;
(vii) agreements relating to immovable property used
exclusively in trade or commerce;
(viii) franchising agreements;
(ix) distribution and licensing agreements;
(x) management and consultancy agreements;
(xi) joint venture agreements;
(xii) shareholders agreements;
(xiii) subscription and investment agreements pertaining
to the services industry including outsourcing services
and financial services;
(xiv) mercantile agency and mercantile usage;
(xv) partnership agreements;
(xvi) technology development agreements;
(xvii) intellectual property rights relating to registered
and unregistered trademarks, copyright, patent, design,
domain names, geographical indications and
semiconductor integrated circuits;
(xviii) agreements for sale of goods or provision of
services;
(xix) exploitation of oil and gas reserves or other natural
resources including electromagnetic spectrum;
(xx) insurance and re-insurance;
(xxi) contracts of agency relating to any of the above;
and
(xxii) such other commercial disputes as may be notified
by the Central Government.
Explanation.-- A commercial dispute shall not cease to be
a commercial dispute merely because-
(a) it also involves action for recovery of immovable
property or for realisation of monies out of immovable
property given as security or involves any other relief
pertaining to immovable property;
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(b) one of the contracting parties is the State or any of its
agencies or instrumentalities, or a private body carrying
out public functions;"
(d)
to
(h)
(i) "Specified Value", in relation to a commercial
dispute, shall mean the value of the subject-matter in
respect of a suit as determined in accordance with section
12 which shall not be less than one crore rupees or such
higher value, as may be notified by the Central
Government."
"Section 5 - Constitution of Commercial Appellate Division- (1)
After issuing notification under sub-section (1) of section 3 or order
under sub-section (1) of section 4, the Chief Justice of the concerned
High Court shall, by order, constitute Commercial Appellate Division
having one or more Division Benches for the purpose of exercising the
jurisdiction and powers conferred on it by the Act.
(2) The Chief Justice of the High Court shall nominate such
Judges of the High Court who have experience in dealing with
commercial disputes to be Judges of the Commercial Appellate
Division."
"Section 6 - Jurisdiction of Commercial Court-The Commercial
Court shall have jurisdiction to try all suits and applications relating to
a commercial dispute of a Specified Value arising out of the entire
territory of the State over which it has been vested territorial
jurisdiction.
Explanation.- For the purposes of this section, a
commercial dispute shall be considered to arise out of the entire
territory of the State over which a Commercial Court has been vested
jurisdiction, if the suit or application relating to such commercial
dispute has been instituted as per the provisions of sections 16 to 20
of the Code of Civil Procedure, 1908 (5 of 1908)."
"Section 8" - Bar against revision application or petition against
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an interlocutory order - Notwithstanding anything contained in any
other law for the time being in force, no civil revision application or
petition shall be entertained against any interlocutory order of a
Commercial Court, including an order on the issue of jurisdiction, and
any such challenge, subject to the provisions of section 13, shall be
raised only in an appeal against the decree of the Commercial Court.
"Section 9 - Transfer of suit if counterclaim in a commercial
dispute is of Specified Value-(1) Notwithstanding anything
contained in the Code of Civil Procedure, 1908 (5 of 1908), in the
event that a counterclaim filed in a suit before a civil court relating to
a commercial dispute is of Specified Value, such suit shall be
transferred by the civil court to the Commercial Division or
Commercial Court, as the case may be, having territorial jurisdiction
over such suit.
(2) In the event that such suit is not transferred in the manner
contemplated in sub-section (1), the Commercial Appellate Division of
the High Court exercising supervisory jurisdiction over the civil court
in question may, on the application of any of the parties to the suit,
withdraw such suit pending before the civil court and transfer the
same for trial or disposal to the Commercial Court or Commercial
Division or, as the case may be, having territorial jurisdiction over
such suit, and such order of transfer shall be final and binding."
"Section 10 - Jurisdiction in respect of arbitration matters-Where
the subject-matter of an arbitration is a commercial dispute of a
Specified Value and-
(1) If such arbitration is an international commercial arbitration,
all applications or appeals arising out of such arbitration under the
provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996)
that have been filed in a High Court, shall be heard and disposed of by
the Commercial Division where such Commercial Division has been
constituted in such High Court.
(2) If such arbitration is other than an international commercial
arbitration, all applications or appeals arising out of such arbitration
under the provisions of the Arbitration and Conciliation Act, 1996 (26
of 1996) that have been filed on the original side of the High Court,
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shall be heard and disposed of by the Commercial Division where such
Commercial Division has been constituted in such High Court.
(3) If such arbitration is other than an international commercial
arbitration, all applications or appeals arising out of such arbitration
under the provisions of the Arbitration and Conciliation Act, 1996 (26
of 1996) that would ordinarily lie before any principal civil court of
original jurisdiction in a district (not being a High Court) shall be filed
in, and heard and disposed of by the Commercial Court exercising
territorial jurisdiction over such arbitration where such Commercial
Court has been constituted."
"Section 11 - Bar of jurisdiction of Commercial Courts and
Commercial Divisions-Notwithstanding anything contained in this
Act, a Commercial Court or a Commercial Division shall not entertain
or decide any suit, application or proceedings relating to any
commercial dispute in respect of which the jurisdiction of the civil
court is either expressly or impliedly barred under any other law for
the time being in force."
"Section 13 - Appeals from decrees of Commercial Courts and
Commercial Divisions-(1) Any person aggrieved by the decision of
the Commercial Court or Commercial Division of a High Court may
appeal to the Commercial Appellate Division of that High Court within
a period of sixty days from the date of judgment or order, as the case
may be:
Provided that an appeal shall lie from such orders passed by a
Commercial Division or a Commercial Court that are specifically
enumerated under Order XLIII of the Code of Civil Procedure, 1908 (5
of 1908) as amended by this Act and section 37 of the Arbitration and
Conciliation Act, 1996 (26 of 1996).
(2) Notwithstanding anything contained in any other law for the
time being in force or Letters Patent of a High Court, no appeal shall
lie from any order or decree of a Commercial Division or Commercial
Court otherwise than in accordance with the provisions of this Act."
(emphasis added)
"Section 14 - Expeditious disposal of appeals- The Commercial
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Appellate Division shall endeavour to dispose of appeals filed before it
within a period of six months from the date of filing of such appeal."
"Section 15 - Transfer of pending cases-(1) All suits and
applications, including applications under the Arbitration and
Conciliation Act, 1996 (26 of 1996), relating to a commercial dispute
of a Specified Value pending in a High Court where a Commercial
Division has been constituted, shall be transferred to the Commercial
Division.
(2) All suits and applications, including applications under the
Arbitration and Conciliation Act, 1996 (26 of 1996), relating to a
commercial dispute of a Specified Value pending in any civil court in
any district or area in respect of which a Commercial Court has been
constituted, shall be transferred to such Commercial Court:
Provided that no suit or application where the final judgment
has been reserved by the Court prior to the constitution of the
Commercial Division or the Commercial Court shall be transferred
either under sub-section (1) or sub-section (2).
(3) Where any suit or application, including an application
under the Arbitration and Conciliation Act, 1996 (26 of 1996),
relating to a commercial dispute of Specified Value shall stand
transferred to the Commercial Division or Commercial Court under
sub-section (1) or sub-section (2), the provisions of this Act shall
apply to those procedures that were not complete at the time of
transfer.
(4) The Commercial Division or Commercial Court, as the case
may be, may hold case management hearings in respect of such
transferred suit or application in order to prescribe new timelines or
issue such further directions as may be necessary for a speedy and
efficacious disposal of such suit or application in accordance with
Order XIV-A of the Code of Civil Procedure, 1908 (5 of 1908):
Provided that the proviso to sub-rule (1) of Rule 1 of Order V of
the Code of Civil Procedure, 1908 (5 of 1908) shall not apply to such
transferred suit or application and the court may, in its discretion,
prescribe a new time period within which the written statement shall
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be filed.
(5) In the event that such suit or application is not transferred in
the manner specified in sub-section (1), sub-section (2) or sub-section
(3), the Commercial Appellate Division of the High Court may, on the
application of any of the parties to the suit, withdraw such suit or
application from the court before which it is pending and transfer the
same for trial or disposal to the Commercial Division or Commercial
Court, as the case may be, having territorial jurisdiction over such suit,
and such order of transfer shall be final and binding."
"Section 21 - Act to have overriding effect-Save as otherwise
provided, the provisions of this Act shall have effect, notwithstanding
anything inconsistent therewith contained in any other law for the
time being in force or in any instrument having effect by virtue of any
law for the time being in force other than this Act."
12 By Section 16 of the Commercial Courts Act, existing CPC
have been amended through the Schedule. As relevant, extracted
newly inserted Order XIII-A :
"ORDER XIII-A
Summary Judgment
1. Scope of and classes of suits to which this Order applies.- (1) This
Order sets out the procedure by which Courts may decide a claim
pertaining to any Commercial Dispute without recording oral
evidence.
(2) For the purposes of this Order, the word "claim" shall
include-
(a) part of a claim;
(b) any particular question on which the claim (whether in
whole or in part) depends; or
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(c) a counterclaim, as the case may be.
(3) Notwithstanding anything to the contrary, an application
for summary judgment under this Order shall not be made in a suit in
respect of any Commercial Dispute that is originally filed as a
summary suit under Order XXXVII." (emphasis added)
Summary Suit and unamended CPC-
13 The Commercial Suits/Applications on the Original Side of
the Bombay High Court are governed by the CPC read with Bombay
High Court (Original Side) Rules, 1980 as amended from time to time
and so also the Summary Suits as contemplated under Order XXXVII
of CPC so filed within the jurisdiction of Bombay High Court (Original
Side). It is always subject to the territorial and pecuniary jurisdiction.
The pecuniary jurisdiction had undergone a change and accordingly
Suits/Petitions/Applications were transferred and/or re-transferred to
the concerned City Civil Court/Small Causes Courts based upon the
valuation of the Suits/applications.
If order=Judgment-under CPC-
14 An ordinary Appeal from Judgment/Order passed by the
learned Single Judge of the Bombay High Court on the Original Side,
apart from the provisions of the CPC is governed by the Letters Patent
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Act, subject to clauses 12 to 15. In the decisions in Shah Babulal
Khimji v. Jayaben D. Kania & Anr.1 and Midnapore Peoples' Co-op. Bank
Ltd v. Chunilal Nanda,2 the Supreme Court observed as under :
"82. We now proceed to deal with the main controversy as to
what is the true scope, meaning and purport of the word
'judgment' used in Clause 15 of the Letters Patent. Numerous
authorities on both sides were cited before us in the course of
the very able arguments advanced by counsels for the parties
and it appears that there are three leading judgments which
have spelt out certain tests to determine as to when an order
passed by a Trial Judge can be said to be a 'judgment' within
the meaning of. clause 15 of the Letters Patent. A very narrow
view on this point was taken by a Division Bench Of the
Calcutta High Court in the case of The Justice of the Peace for
Calcutta (supra) where Sir Couch, C.J. On an interpretation
of Clause 15 of the Letters Patent observed thus:-
We think that "judgment" in clause 15 means a decision which
affects the merits of the question between the parties by
determining some right or liability. It may be either final, or
preliminary, or interlocutory, the difference between them
being that a final judgment determines the whole cause or
suit, and a preliminary or interlocutory judgment determines
only a part of it, leaving other matters to be determined.
"113 ..........(3) Intermediary or Interlocutory judgment-Most
of the interlocutory orders which contain the quality of
finality are clearly specified in clauses (a) to (w) of Order 43
Rule 1 and have already been held by us to be judgments
within the meaning of the Letters Patent and, therefore,
appealable. There may also be interlocutory orders which are
not covered by Order 43 Rule 1 but which also possess the
characteristics and trappings of finality in that, the orders
may adversely affect a valuable right of the party or decide an
important aspect of the trial in an ancillary proceeding.
1 (1981) 4 SCC 8
2 AIR 2006 SC 2190
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Before such an order can be a judgment the adverse effect on
the party concerned must be direct and immediate rather
than indirect or remote. For instance, where the Trial Judge in
a suit under Order 37 of the Code of Civil Procedure refuses
the defendant leave to defend the suit, the order directly
affects the defendant because he loses a valuable right to
defend the suit and his remedy is confined only to contest the
plaintiff's case on his own evidence without being given a
chance to rebut that evidence. As such an order vitally affects
a valuable right of the defendant it will undoubtedly be
treated as a judgment within the meaning of the Letters
Patent so as to be appealable to a larger Bench.".......
The Supreme Court in Midnapore Peoples' Co.op Bank Ltd.
(Supra) has observed in para 16 as under:-
"16. Interim orders/interlocutory orders passed during the
pendency of a case, fall under one or the other of the following
categories:
(i) Orders which finally decide a question or issue in
controversy in the main case.
(ii) Orders which finally decide an issue which materially and
directly affects the final decision in the main case.
(iii) Orders which finally decide a collateral issue or question
which is not the subject matter of the main case.
(iv) Routine orders which are passed to facilitate the progress
of the case till its culmination in the final judgment.
(v) Orders which may cause some inconvenience or some
prejudice to a party, but which do not finally determine the
rights and obligations of the parties.
The term 'judgment' occurring in Clause 15 of the Letters
Patent will take into its fold not only the judgments as defined
in Section 2(9) CPC and orders enumerated in Order 43 Rule
1 of CPC, but also other orders which, though may not finally
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and conclusively determine the rights of parties with regard to
all or any matters in controversy, may have finality in regard
to some collateral matter, which will affect the vital and
valuable rights and obligations of the parties. Interlocutory
orders which fall under categories (i) to (iii) above, are,
therefore, 'judgments' for the purpose of filing appeals under
the Letters Patent. On the other hand, orders falling under
categories (iv) and (v) are not 'judgments' for purpose of filing
appeals provided under the Letters Patent."
(Emphasis added)
The scheme of Commercial Courts Act-
15 The terms "Commercial Court", "Commercial Division" and
"Commercial Appellate Division" have been defined under Sections 3,
4 and 5 of the Commercial Courts Act. The constitution of the
Commercial Courts is by the State Government which are at district
level in territories other than the territories where the High Court has
ordinary original civil jurisdiction. The constitution by the State
Government is subject to the condition of consultation with the
concerned High Court by publishing a notification in the Official
Gazette specifying the local limits of jurisdiction of the Commercial
Courts. It is also subject to nomination of one or more persons having
experience in dealing with commercial disputes to be a Judge or
Judges of Commercial Courts.
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16 The constitution of Commercial Division of High
Court is also subject to the order of Chief Justice of High
Court consisting of Commercial Division, having one or more
Branches consisting of a Hon'ble Judge/Judges. The Chief
Justice of High Court, by the nomination, has appointed the
Judges of High Court who have experience in dealing with the
commercial disputes. The constitution of Commercial Appellate
Division by the nomination, is also by the order of Chief
Justice of the High Court, keeping in mind to nominate such Judges of
High Court, who have experience in dealing with the commercial
disputes.
17 Chapter II of the Commercial Courts Act deals with the
constitution of Commercial Courts and Commercial Divisions and
Commercial Appellate Divisions at various levels/courts. There is no
issue that Commercial Courts and Commercial Divisions and
Commercial Appellate Divisions are required to be constituted as per
the prescribed provisions so referred above. The order/nomination by
the Chief Justice in case of Commercial Division and the Commercial
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Appellate Division is thus sufficient so far as the constitution of
such Divisions under the Commercial Courts Act. The requirement
of notification/ order by the State Government in consultation
with the Chief Justice is also the requirement of the Act for
the constitution of Commercial Courts in the district
area/territories. So far as the Government of Maharashtra is
concerned, a notification dated 13 June 2016 was issued under
Section 3(1) constituting a Commercial Court in each district
and in some places, Judges have been appointed to preside over
the Commercial Court by appointment order dated 21 July
2016. As noted, the Commercial Divisions of the Bombay High
Court have been constituted from time to time by nomination
and so also the Commercial Appellate Divisions of High Court
as contemplated under Sections 4 and 5 of The Commercial Courts
Act.
18 In view of Section 2(1)(c) of Commercial Courts
Act, in view of definition of "commercial dispute" and
"specified value" and as the summary suits fall within the
definition of "commercial dispute" and the valuation of the
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subject matter exceeds one crore, the provisions of Commercial
Courts Act would apply to such Suits, Petitions and
Applications and the Appeal in question. There is no issue on
this.
19 Section 6 empowers the Commercial Court to try
and hear all suits and applications relating to a
commercial dispute based upon the valuation so recorded
above which is subject to territorial jurisdiction. All suits and
applications relating to a commercial dispute where the
subject matter exceeds Rupees one crore and which are
pending in any Civil Court in any District shall be
transferred to the Commercial Courts so constituted is the
mandate of Section 15(2) of the Commercial Courts Act.
Section 7 empowers "Commercial Division" of High Court to
hear "All suits and applications relating to commercial disputes
of the stated value of the subject matter which are filed
in High Court having ordinary original civil jurisdiction".
This includes all suits/applications filed before the
commencement of the Commercial Courts Act/Ordinance and
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even the constitution of Commercial Division. This also
includes all fresh suits, applications filed after the
commencement of the Act and/or constitution of the
Commercial Division provided it should be 'commercial
disputes', having the valuation of the subject matter exceeding
one crore. The mandate of Section 15(1) of the Commercial
Courts Act is applicable even for all suits and applications pending
in the High Court where commercial Division has been constituted - It
shall be transferred to the Commercial Division of the High Court. It
is, therefore, clear that Commercial Courts Act, in view of above
provisions so reproduced is made applicable retrospectively and would
take into its ambit all pending suits, petitions and applications relating
to commercial dispute of the specified value and specified disputes.
Therefore, all such suits, petitions and applications pending or fresh,
will be governed by the Commercial Courts Act with effect from
23.10.2015. This is also clear, therefore, that all the rights in regard
to pending suits, petitions and applications shall be governed by the
Commercial Courts Act, once transferred.
The Commercial Court Appeal against Decision/Judgment/order/decree-
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20 The jurisdiction of the Commercial Appellate Division as
provided in Chapter II and specifically Section 13 provides that the
Commercial Appellate Division of a High Court has jurisdiction to hear
Appeals from decisions, judgments, orders or decrees passed by the
Commercial Division of that High Court or by Commercial Courts
within the local limits of the jurisdiction of the High Court.
21 After giving due consideration to the provisions of Section
13(1) read with Section 13(2) it is apparent that it provides that
Appeals will lie to the Commercial Appellate Division against the
decision of the Commercial Court or Commercial Division. The words
"decision", "Judgment", "Order" "decree" as such are not defined. It is
defined and elaborated under the CPC. From Section 13(1) it follows
that it includes "judgment" or "order" and read with Sections 8, 13(2)
it includes "decree" of the Commercial Court or Commercial Division.
However, it is specifically mentioned in proviso to Section 13(1) that
such orders as enumerated in Order XLIII of CPC should be the order
against which an Appeal against order is maintainable under Section
13. Further the proviso contemplates that an Appeal would lie against
appealable order under Section 37 of the Arbitration and Conciliation
ssm/dgm 24 comap-7-16-judgment-24-10-16-final.sxw
Act, 1996. Section 13(2) has restricted the Appeals even for Section
13 of the Commercial Courts Act by rider that "no Appeal shall lie
from any order or decree of a Commercial Division or Commercial
Court other than in accordance with the provisions of this Act.". This
is also with "notwithstanding" clause under Section 13(2) whereby, it
is mandated that "notwithstanding anything contained in any other
law for the time being in force or Letters Patent of High Court".
Therefore, taking into consideration the overall provisions
and intent of Section 13(1)and (2) which provides the specific orders
against which an Appeal can be filed in such commercial matters. The
Appeal under Section 13 is maintainable, once the Suits, Petitions
Applications and Appeals are transferred and treated as commercial
disputes having specified value, where the learned Commercial
Division Judge has taken the decision and/or passed the "judgment"
and/or "order" or "decree". It is relevant to note that under Section
21 of the Commercial Courts Act, it is mandated and reinforced that
the provisions of the Commercial Courts Act will prevail over the
provisions of other Act. Therefore, an Appeal under Section 13 of the
Commercial Courts Act is maintainable against the decision/
judgment/ order or decree, if it falls within the ambit of the provisions
ssm/dgm 25 comap-7-16-judgment-24-10-16-final.sxw
of the Commercial Courts Act. This includes that the subject matter
must be commercial dispute having valuation of more than one crore
and falls within the territorial and pecuniary jurisdiction of the
respective Court and/or Division and/or subject to the specific
provisions like the Arbitration and Conciliation Act, read with the
special statutes and the provisions so required, referred under
umbrella of "commercial dispute" so defined.
Appeal against any final decision include the judgment so
passed by the Commercial Court and/or Commercial Division, the
proviso to Section 13(1) will not be applicable to such
decision/judgment, as the proviso refers to "orders". The reference to
"orders" in the opening portion of Section 13(1) would relate to the
application of the proviso to sub-section (1). However, the opening
portion of sub-section (1) (words prior to the proviso) clearly use the
words "decision", "judgment" and "order". Therefore, the ambit of
this part of sub-section (1) is quite broader when it comes to appeals
arising out of orders other than the category of orders falling under
order XLIII of the CPC. Therefore, an Appeal under Section 13(1),
even if there is an order, but which has a tinge or colour of judgment
ssm/dgm 26 comap-7-16-judgment-24-10-16-final.sxw
as laid down by the Hon'ble Supreme Court in Shah Babulal
Khimji v. Jayaben D. Kania & anr3 and Midnapore Peoples' Co-op.
Bank Ltd. (supra), the Appeal under Section 13 against such
order being a "judgment" within the meaning of CPC, is
maintainable. The provisions of CPC (amended and unamended)
are applicable to the Commercial Courts Act's proceedings. The
term "Judgment" was not even defined under the Letters Patent Act.
In the summary suit, though it is an interlocutory order of granting
Defendants conditional leave to defend such summary suit, as it
directly affects and loses the valuable rights of the Defendant without
giving full opportunity and as transferred and as heard by the learned
Commercial Division Bench/Judge, the Commercial Appeal against
such "Judgment" is maintainable. Therefore, we are of the view that
there is no reason to hold that the Commercial Appeal as filed is not
maintainable.
"Summary Suit" and "Summary Judgment"-
24 The conceptual position of "summary suit" as
contemplated under Order XXXVII of CPC and its specific
3 (1981) 4 SCC 8
ssm/dgm 27 comap-7-16-judgment-24-10-16-final.sxw
provisions are governed as per the original provisions of CPC.
The amended CPC, in view of Section 16 of the Commercial
Courts Act inserted the provision for a "summary judgment",
through Order XIII-A which is made applicable to the classes of
Suits (commercial suits) which required to be decided by the
Commercial Division/Court. It prescribes the procedure and
stages for application for summary judgment. This also includes
and provides the powers of a Commercial Judge to pass
conditional order including for evidence for hearing of summary
judgment. We are concerned with Order XIII-A, Rule 1(3) of
CPC, whereby it is specifically provided "notwithstanding
anything to the contrary, "an application" for summary judgment
under this Order shall not be made in a Suit in respect of any
commercial disputes that is originally filed as a summary suit
under Order XXXVII.". Therefore, once the summary suit as
originally filed, prior to the commencement of the and as now
transferred, being commercial dispute matter, the original
procedure as provided under Order XXXVII shall be applicable to
such summary suits. The parties are not entitled to prayer
for summary judgment under XIII-A in view of the specific
ssm/dgm 28 comap-7-16-judgment-24-10-16-final.sxw
provision so referred above. This also means that the
judgments and the issues so decided in summary suit shall for
all purposes be governed by the CPC, even after such suits
are transferred as commercial suits. The Commercial Division
Judge is required to follow the original C.P.C. and is required
to keep in mind the position in law revolving around all the
facets of summary suits. The provisions of Section 13, therefore,
is required to be interpreted and/or considered accordingly,
when any decision is given by the Commercial Division/Court in
such summary suit. The proviso to Section 13(1), will not affect
the maintainability of such Appeal so filed against such
order/judgment passed by the Commercial Division/Court in such
summary suit.
25 The submission that Section 13 proviso has
extinguished, expressly and/or by necessary intentment the
Appeal against the order passed by the Commercial Judge in
summary suit granting the Defendant conditional leave to
defend a summary suit is unacceptable. Section 13 itself
contemplates that an Appeal is maintainable against the
ssm/dgm 29 comap-7-16-judgment-24-10-16-final.sxw
decision/judgment or order which has effect of "judgment",
though it falls outside the purview of Order XLIII as observed
above.
The right of appeal is creation of statute-
26 It is settled that a right of Appeal is not a matter
of procedure, but it is a matter of a substantive right which
accrues to the litigant and as exists on the date of suit being
instituted (see The Constitutional Bench decision in Garikapati
Veeraya Vs. N. Subbiah Choudhry & Ors 4., para 23) Such right of
Appeal is governed by the law prevailing at the date of the
institution of the suit or proceedings and not by the law
that prevails at the date of its decision or at the date of filing
of the Appeal. It is equally settled that a vested right of
Appeal is not absolute; and that it can in fact be abrogated
either explicitly or by implicit intendment. [Kamal Kumar Dutta
vs. Ruby General Hospital5]. The Commercial Courts Act provides
for an Appeal against the decision, judgment and order so
referred above. An Appeal is available if the commercial
4 AIR 1957 SC 540
5 (2006) 7 SCC 613
ssm/dgm 30 comap-7-16-judgment-24-10-16-final.sxw
suit/dispute is dealt with by the Commercial
Division/Commercial Court and passes order/judgment and/or
take decision. This statutory Appeal as provided, therefore,
cannot be taken away notwithstanding anything contained in
any other law for the time being in force or Letters
Patent of a High Court [Section 13(2)]. The Commercial
Courts Act or special Statute, if empowers, the Appellate
Division Court to deal with the Appeal against the
Judgment/order passed by the Commercial Division or the
Commercial Court, the bar so submitted of proviso to Section
13(1) is not applicable in each and every matter
specifically when the subject matters are commercial disputes
as defined under the Commercial Courts Act and are also
governed by the Special Act/Statute other than the CPC. The
specific provisions/ Statute/ Act will prevail as substantial
rights, if are created over the provisions of Order XLIII CPC,
as provided in proviso to Section 13(1) of the Commercial Courts
Act.
Filing of Appeal under Section 13 of the Commercial Courts Act, cannot
be occluded-
ssm/dgm 31 comap-7-16-judgment-24-10-16-final.sxw
27 Section 13 Scheme itself provides Appeal against decision
which includes judgment/order passed by the Commercial
Division/Court. There is no provision of revision against the
interlocutory order in view of bar of Section 8. Section 8 further
clarifies that only Appeal against such order is available subject to
Section 13 proviso. Even the issue of jurisdiction or such challenge
will be subject to Section 13 of the Commercial Courts Act. Therefore,
the aggrieved parties have no option but to file Appeal against the
decision/order. The Appellate Court, however, may or may not
entertain appeal against the order or interlocutory order, in view of
proviso to Section 13(1). But filing of Appeal under Section 13, in our
view, cannot be occluded. The Appeal against any decision of any
Commercial Division/Court is maintainable. To entertain or not is the
Appellate Court's power and the jurisdiction depends upon the facts
and circumstances of the case.
The effect of not permitting to file the Commercial Appeal, in such
matters-
28 Another factor is, if such Appeals are not permitted, the
aggrieved parties shall have no option but to invoke ordinary
jurisdiction of the High Court or Court to challenge the interlocutory
ssm/dgm 32 comap-7-16-judgment-24-10-16-final.sxw
order or order though the decision is by the Commercial
Division/Court, as commercial disputes are transferred and governed
by the Commercial Courts Act for all the purposes. Such dichotomy, in
our view, is surely not the intention of the legislature as followed
from a cumulative reading of the various provisions as noted by us.
The filing of such Commercial Appeal by the party in the ordinary
Court, except where suit/application, valuation is less than one crore,
therefore, is not what is contemplated. It will frustrate the ambit and
object of the Commercial Courts Act.
The commercial disputes of specified valued shall be governed by the
Commercial Act only-
29 There is no scope to any authority, not to transfer the
commercial suits, having one crore and above valuation, for the
purpose of pecuniary jurisdiction under the Commercial Courts Act, in
case of a commercial dispute. The State Government needs to take
steps as contemplated under Sections 19 and 20 of the Commercial
Courts Act. All and every concerned authority are bound to aid and
assist to give effect to these provisions to all the pending
Suits/Applications, to achieve the object of the Commercial Courts
Act. All are bound by the provisions, including amended CPC to
ssm/dgm 33 comap-7-16-judgment-24-10-16-final.sxw
expedite the pending Suits filed prior or post the Commercial Courts
Act. The Appeals are also expedited by the provisions so also pending
Arbitration Petitions/Appeals as specified, though filed prior to the
enforcement of the Commercial Courts Act. Sections 10, 13 and 15
deal with the pending Arbitration matters, including Appeal under
Section 37 of the Arbitration and Conciliation Act. The Supreme
Court in a recent decision in Arun Dev Upadhyaya Vs. Integrated Sales
Service Ltd. & Anr.6, now has expanded and included even the Appeal
under Section 50 of the Arbitral Act in the facts of the case. It needs
to be subject to valuation of the Suit/Appeal.
30 We are also inclined to observe that the vested right of
Appeal is not taken away by the Commercial Courts Act. However, it
is subject to Section 13 so recorded above and/or Section 13 in no
manner takes away and/or extinguishes right of Appeal in pending
summary suits which are transferred and dealt with by the
Commercial Division/Court.
31 Having once observed that the Appeal under Section 13 of
the Commercial Courts Act is maintainable, we are dealing with the
6 2016(9) SCALE 427
ssm/dgm 34 comap-7-16-judgment-24-10-16-final.sxw
merits of the matters on the facts and in the background already
reflected/mentioned in the initial paras.
32 The background of the litigations between the parties is
relevant for consideration of this Appeal on merits.
The Respondent (Plaintiff) is a Company incorporated
under the Companies Act, 1956 and is a Debenture Trustee of the
debentures issued to Vinca Developer Private Limited ("Vinca") by
Amazia Developers Private Limited ("Amazia") and Rubix Trading
Private Limited ("Rubix"). Amazia and Rubix are wholly owned
subsidiaries of Vinca. The Appellant (Defendant) and its individual
promoters collectively own 90 per cent shareholding in Vinca.
Nederlandse Financierings - Maatschappiji Voor Ontwikkelingslanden
N.V. ("FMO") is a Corporation constituted under the Laws of
Netherlands. FMO holds 10 per cent shareholding in Vinca. FMO also
holds 3 Compulsorily Convertible Debentures (CCDs) issued by Vinca.
The said three CCDs were convertible within a period of 60 months
from December 2009. Upon such conversion, FMO would hold 90%
shareholding in Vinca. The investment made by FMO in Vinca in the
form of three CCDs was used by Vinca to purchase Optionally
ssm/dgm 35 comap-7-16-judgment-24-10-16-final.sxw
Convertible Debentures ("OPCDs") issued by Amazia and Rubix. In
respect of the OPCDs, a Debenture Subscription and Debenture Trust
cum Mortgage Deed was executed on 1 December 2009 between
Amazia, the Defendant and the Plaintiff. Similarly in respect of the
OPCDs issued by Rubix, a Debenture Subscription and Debenture
Trust cum Mortgage Deed dated 1 December 2009 was executed
between Rubix, the Defendant and the Plaintiff as amended by OPCD
Amendment Agreement dated 8 September 2010. The aforesaid
deeds shall hereinafter be collectively referred to as "the Debenture
Trust Deeds" (DTDs). In respect of the liability arising under OPCDs,
the Defendant executed a Deed of Corporate Guarantee dated 9
December 2009 in favour of the Plaintiff, (the Guarantee).
33 For the purpose of the present Appeal, the case of the
Respondent-Plaintiff is as under:-
On 1 December 2009, Facility Agreement was executed
between inter alia Rubix Trading Private Limited (as Borrower),
Deutsche Investments India Private Limited (as Lender), the
Respondent (Plaintiff) (as Security Trustee) and the Appellant-Hubton
(Defendant) (as Confirming Party), DIIPL has provided Rubix with a
ssm/dgm 36 comap-7-16-judgment-24-10-16-final.sxw
loan facility of Rs.23,50,00,000/- (Rupees Twenty Three Crores and
Fifty Lakhs only). On 9 December 2009, the Defendant (as
Guarantor/Surety) has executed a Deed of Guarantee cum Mortgage
and under which the Defendant has inter alia agreed to stand
surety/guarantor and provide guarantee on behalf of Rubix in favour
of the Plaintiff for the benefit of DIIPL on the terms and conditions
more particularly set out therein. On 22 January 2010, the said
facility was disbursed to Rubix by DIIPL. On 22 April 2012, Rubix was
liable to pay interest on the facility each quarter. However, Rubix
defaulted in payment of interest on the facility since 22 April 2012.
On 5 March 2013, Rubix made part payment of Rs.42,54,745/-.
34 The Respondent-IDBI (Plaintiff) filed Summary Suit No.
520/2013 on 16 May 2013 against the Defendant for recovery of dues
under the said Guarantee. Prior to the filing of the Suit, the
Respondent (Plaintiff) (IDBI) on 10 May 2013, filed Company Petition
No. 644 of 2013 seeking winding up of the Defendant on the ground
that the Defendant has failed to comply with the statutory notice to
pay the amount under the guarantee. On 12 February 2014, the
Respondent-IDBI (Plaintiff) filed Summary Suit No. 480 of 2014 for
ssm/dgm 37 comap-7-16-judgment-24-10-16-final.sxw
recovery of the back end coupon dues payable under the said
guarantee which amount was not included in the above summary Suit.
The Defendant (Hubton) has filed its affidavit in the Summons for
Judgment raising several contentions. The Plaintiff too has filed
affidavits dealing with the contentions raised by the Defendant. An
additional affidavit is filed on behalf of the Plaintiff dated 4 July 2014
in Company Petition No. 644 of 2013 bringing on record the various
facts.
35 In view of the aforesaid defaults on the part of Rubix and
the Defendant, DIIPL vide its letter dated 5 June 2013, cancelled the
facility with immediate effect and declared that all of the facility,
along with accrued interest thereon were immediately due and
payable. On 8 June 2013, the Advocates for Rubix sent DIIPL a
holding reply. On 9 June 2013, in the meantime, considering that
Rubix had not fulfilled its obligations under the facility Agreement and
considering that Rubix failed and/or neglected to repay the amounts
demanded under the Recall Notice, the Plaintiff was constrained to
issue a Demand Certificate to the Defendant for the enforcement of
the Guarantee, in terms of the Deed of Guarantee.
ssm/dgm 38 comap-7-16-judgment-24-10-16-final.sxw
36 Rubix's aforesaid holding reply was followed by a further
reply dated 18 July 2013, as stated, false, baseless and wholly
untenable allegations in its defence. On 8 August 2013, DIIPL vide
their letter replied to Rubix's letter dated 18 July 2013. Despite
repeated requests and reminders and post several meetings and
discussions, the Defendant and/or Rubix have failed and/or neglected
to repay the Facility along with all amounts due and/or accrued
thereunder including interest and default interest since 23 April 2012.
In view thereof, on 14 August 2014, DIIPL was constrained to issue a
supplementary recall notice to Rubix. On 19 August 2014, the
Plaintiff (IDBI) issued supplementary Demand Certificate to the
Defendant (Hubton) for the enforcement of the Guarantee, in terms
of the Deed of Guarantee. No reply has been received to the
aforementioned supplementary recall notice and supplementary
demand certificate. Hence the summary suit and summons for
Judgment No.39/2013.
37 The Single Judge (Coram:- S.J. Kathawalla, J.) on 8 May
2015 in Summons for Judgment No. 39 of 2013 in Summary Suit No.
ssm/dgm 39 comap-7-16-judgment-24-10-16-final.sxw
520 of 2013 has passed the following order:-
"42. In the circumstances I am of the view that the
Defendant has raised triable issues which require
adjudication on further evidence at the time of final
disposal of the suit. Hence the following order:
(i) Unconditional leave is granted to the Defendant to
defend the above suit;
(ii) The suit is transferred to the list of commercial
causes and the Defendant is directed to file its written
statement on or before 15th June, 2015;
(iii) The hearing of the suit is expedited and the Court
will endeavour to dispose of the suit within a period of
one year from the date of this order. It is clarified that
the Suit shall be decided without being influenced by any
of the observations made in the present order;
(iv) Place the suit for framing of issues on 29th June,
2015.
The Summons for Judgment is accordingly disposed
of."
38 The Respondent-IDBI's (plaintiff's) case in Summons for
Judgment No.111 of 2014 in Summary Suit No.776 of 2014, is as
under:-
The Respondent's (Plaintiff's) case is that the Deed of Guarantee
executed by the Appellant (Defendant) relates to the following three
separate and distinct transactions:-
ssm/dgm 40 comap-7-16-judgment-24-10-16-final.sxw
(a) Repayment of the amount of Rs.23.50 Crores loaned
by DIIPL to Rubix under the Facility Agreement;
(b) Due performance and repayment by Amazia, of its
OPCDs of Rs.150 Crores issued to Vinca on terms and
conditions mentioned in Amazia OPCD Subscription
and Debenture Trust Deed of 1 December 2009; and
(c) Due performance and repayment by Rubix of OPCDs
totaling Rs.268 Crores issued and allotted to Vinca on
terms and conditions mentioned in Rubix OPCD
Subscription and Debenture Trust Deed of 1 December
2009.
Amazia and Rubix transactions referred to in (b) and (c) above
involved Vinca which was a 100% holding company of both Amazia
and Rubix. There was a separate Summary Suit filed by the Plaintiff
herein for enforcement of the guarantee given by the Defendant
herein for those two transactions. It was the case of the Defendant in
that suit that the OPCDs reflected investments made by FMO (referred
to above), though ostensibly in Vinca, actually meant for Amazia and
Rubix operating in the housing sector and what the transaction really
contemplated was FDI with assured/fixed returns in housing sector,
ssm/dgm 41 comap-7-16-judgment-24-10-16-final.sxw
i.e. in Amazia and Rubix, through a nominal recipient, Vinca. On a
Summons for Judgment taken out in that suit, a learned Single Judge
came to the conclusion that the factual matrix and transaction
documents prima facie established that the transaction of routing FDI
through the newly interposed Vinca was a colourable device and was
structured to enable FMO to secure repayment of FDI at a fixed rate of
return, thus contrary to the FDI policy and statutory FEMA regulations
and thus, opposed to public policy and illegal. The learned Judge held
that the Deed of Guarantee issued by Vinca being a part of this
structure was also prima facie unenforceable. (The learned Judge (S.J.
Kathawalla,J), accordingly, granted unconditional leave to defend on
8 May 2015).
39 It is, however, the Respondent-IDBI (Plaintiff's) case in the
present summary suit that the Deed of Guarantee insofar as it relates
to the DIPPL Loan (forming part of (a) above), which is the subject
matter of the present suit, is on the basis of the Facility Agreement
which is in fact a plain vanilla Indian Rupee loan provided by the
Plaintiff, an Indian registered Non-Banking Finance Company to
Rubix, an Indian Entity, to which no FDI law or policy applies. It is
ssm/dgm 42 comap-7-16-judgment-24-10-16-final.sxw
submitted that though this guarantee is contained in the same
document as the guarantee provided for Amazia and Rubix OPCDs, it
has nothing to do with either of these two transactions. It is submitted
that it is an altogether separate transaction and in any event,
severable from the other transactions.
40 The defence of the Appellant-Original Defendant
(Hubtown) was noted in para 6 and 12 of the said Summons for
Judgment, which reads thus:-
"The Defendant disputes this case. Mr. Chinoy, learned Senior
Counsel appearing for the Defendant, relies on paras 8(iv), (x), (xiii),
(xxi) and (xxiv), and paras 15 and 16 of the affidavit in reply and
paras 4, 9, 14, 18, 20, 22, 24 and 25 of the affidavit in rejoinder and
argues that the circumstances reflected therein show that these three
transactions were related and formed part of one whole transaction.
The gist of his contentions is this : Deutsche Bank A.G. agreed to act
as an arranger of funds to be invested in a group company/companies
of the Defendant to the tune of USD 60 million (with an option to
increase it to USD 90 to 100 million) at an IRR of upto 20% per
annum. (The OPCDs of Rubix and Amazia were part of this
ssm/dgm 43 comap-7-16-judgment-24-10-16-final.sxw
investment.) The consideration payable to Deutsche Bank was a
stipulated arranger fee. The foreign investor identified by Deutsche
Bank (i.e. FMO) was willing to invest around USD 90 to 100 million at
a lower IRR (i.e. 14.75 % p.a.). As a result, Deutsche Bank asked for
an increased arranger fee. The Defendant and its group companies
being in a desperate need of funds, had to give in to this demand and
were constrained to pay revised arranger fee. Deutsche Bank, in turn,
agreed to reroute a part of the revised arranger fee as a loan to the
Defendant or any of its group companies. The loan of Rs.23.50
extended by DIIPL, at a far higher rate of interest, was a part of that
commitment and thus, a part and parcel of the illegal structuring
undertaken by Deutsche Bank. The Defendant submits that it was at
the instance of the foreign investor that the loan of Rs.23.50 Crores
was extended as an "Indian leg of the structured transaction of the
Foreign Investor along with Deutsche Bank A.G..... inspite of the fact that
Rubix was in no need of the additional secured loan of
Rs.23,50,00,000/from DIIPL". Relying on these facts, namely, of
increased arranger fees, proximity of the dates of the individual
transactions and common security documents, Mr. Chinoy submits
that the transaction is one whole and the DIIPL loan and the Deed of
ssm/dgm 44 comap-7-16-judgment-24-10-16-final.sxw
Guarantee insofar as it relates to that loan cannot be separated from
FDI brought into India in an illegal and impermissible manner."
"Learned Counsel for the Defendant relies on the analysis
of the facts of the case in the Plaintiff's suit for enforcement of
guarantees in respect of Amazia and Rubix OPCD transactions in IDBI
Trusteeship Services Ltd. Vs. Hubtown Ltd . 7 by the Learned Judge (S.J.
Kathawalla, J.), whilst dealing with the case of Videocon Industries
Limited Vs. Intesa Sanpaolo S.P.A . 8 in support of his defence. In that
case, the learned Judge was considering the severability of the routing
of FDI investment in Amazia and Rubix through the newly interposed
Vinca (as the nominal recipient of FDI) and the guarantee given by the
Defendant to ensure repayment of the FDI. The learned Judge held
them to be prima facie inseverable. Here, we are considering the
severability of the guarantee towards repayment of FDI and towards
repayment of the Indian loan, which is separate from the FDI
transaction. The observations dated 8 May 2015 of Kathawalla, J. in
that case have no bearing on this severability."
41 The operative part of the impugned order dated 6 June
7 Summons for Judgment No.39-13 in Summary Suit No.520-13 decided on 8 May 15.
8 2014 SCC OnLine Bom 1276
ssm/dgm 45 comap-7-16-judgment-24-10-16-final.sxw
2006 passed in Summons for Judgment No.111 of 2014 in summary
suit, is as under:-
"14 Accordingly, the Summons for Judgment is disposed of
in terms of the following order:-
(i) The Defendant is granted leave to defend on and
subject to the condition of depositing a sum of
Rs.33,55,16,946.85 in this Court within a period
of twelve weeks from today;
(ii) Upon such deposit being made, the suit shall be
transferred to the list of commercial causes;
(iii)
The Defendant to file its Written Statement in the
suit within twelve weeks of making of the deposit;
(iv) The amount of deposit, if any, shall be invested by
the Prothonotary & Senior Master of this Court in
a fixed deposit of a Nationalized Bank initially for
a period of two years and thereafter, to be
renewed from time to time and to abide by further
orders that may be passed in the suit;
(v) The suit to come up on board for directions after
twenty four weeks from today."
42 Hence, this Commercial Appeal filed on 12 July 2016.
The reasons for the reversal of the impugned order-
Two views on construction of documents-question of law-triable issue-
43 Admittedly, the findings given by the learned Single Judge
on documents being severable or unseverable, goes to the root of the
ssm/dgm 46 comap-7-16-judgment-24-10-16-final.sxw
interpretation and the construction of the same documents and the
related transactions. The contrary view so expressed by the learned Judge
in the impugned order (para 40 and 41), in view of the earlier findings
(para 39) itself require a consideration in the suit and more particularly
when another learned Single Judge in Summary Suit No. 520 of 2013
(supra) has prima facie held the document/guarantee is inseverable. In this
position we are not persuaded to accept that the ratio of the decision of the
Supreme Court in B.O.I. Finance Ltd. Vs. Custodian & Ors. 9, and in
Canbank Financial Services Ltd. Vs. The Custodian & Ors. 10 would be
applicable to the facts in hand. Reasoning of the learned Single
Judge, (S.J. Kathawalla, J.) in order dated 8 May 2015, in para 37.2,
37.3 read thus-
"37.2 In the case in hand, I am prima facie of the view that
the structure/device of routing FMO's FDI amount of
Rs. 418 crores to Amazia and Rubix through the newly
interposed Vinca (as the nominal recipient of the FDI)
was a colourable device structured only to enable FMO
to secure repayment (through Vinca) of its FDI
amount and interest thereon at 14.75%, contrary to
the statutory FEMA Regulations and the FDI policy
embodied therein, which only permit FDI investment in
townships/real estate development sector to be made
in the form of equity (including Compulsorily
Convertible Debentures) and preclude any assured
return. I am also prima facie of the view that the
Defendant's guarantee (which is the basis of the
9 (1997) 10 SCC 488
10 (2004) 8 SCC 355
ssm/dgm 47 comap-7-16-judgment-24-10-16-final.sxw
Company Petition No. 644 of 2013) though
ostensibly in favour of Vinca, an Indian Company, was
part of the aforesaid illegal structure/scheme and was
given to ensure that FMO received back its FDI
amount with interest as aforesaid through Vinca. The
Guarantee was therefore part of the aforesaid illegal
structures/scheme and therefore prima facie illegal
and unenforceable.
37.3 Further the question of the Defendant not being
allowed to plead its own wrong also does not arise in
the facts of the present case. Through the present
Petition, the Plaintiff (who is admittedly acting at the
instance of FMO/FMO's nominees) is in effect seeking
the assistance of this Court to enable/enforce recovery
by FMO of its FDI amount and interest thereon
(through Vinca), contrary to the provisions of the
FEMA Regulations and FDI policy embodied therein. As
has been held by the Hon'ble Supreme Court in the
case of Immami Appa Rao vs. G. Ramalingamurthi
(supra), the Plaintiff who wants orders in his favour,
is actually seeking the active assistance of the Court
to achieve what the law prohibits/declares illegal and
that is clearly and patently inconsistent with
public interest. Moreover, as has been held by the
Supreme Court in the above case, in such a case there
can be no question of estoppel and the paramount
consideration of public interest requires that the
plea be allowed to be raised and tried."
The defence so raised itself being the question of law, as the interpretation
of documents itself goes to the root of the transactions/contract and the
claim based upon it. In the present case, B.O.I. Finance Ltd. (Supra), as
relied is not applicable on facts and the laws. That was a case of
ssm/dgm 48 comap-7-16-judgment-24-10-16-final.sxw
ready forward contract. In the case in hand, three documents and the
transactions, of which two views of the learned Judges unless decided
finally in due trial, it is difficult to accept the case that the view taken
by the one learned Judge that transactions are sham and bogus and
unseverable and other Judge hold it to be severable, without trial and
by overlooking the earlier opinion, this itself is a triable issue. The
Appellate Bench also may not decide such issue on such question of
law, considering the scope and purpose of law on order XXXVII of the
CPC, at this stage of the Summary Suit. It should be after final
Judgment. In the present case, the same documents are interlinked and
interconnected as observed by the earlier learned Judge, therefore,
unless these findings are set aside, the findings in the impugned order
that those are severable just cannot be accepted, without the trial. The
case of misconstruction or interpretation of all connected documents
itself made out a case of good defence. It cannot be treated as
sham or bogus defence. The misinterpretation itself affects the rights
and the transaction/claim. Therefore, the construction of documents
is always question of law so is the position in case in hand. The
distinction, therefore, at this stage, in summary proceedings like this,
itself will not sufficient to deny the order of unconditional leave as
ssm/dgm 49 comap-7-16-judgment-24-10-16-final.sxw
granted by one Judge on the basis of same documents. (Sir Chunilal V.
Mehta and sons Ltd. Vs. Century Spinning and Manufacturing Co. Ltd. 11
and Hero Vinoth (Minor) Vs. Seshammal12)
Interpretation of documents and the nature of transactions-triable issue-
44 We have to consider the legal position in view of the
contentions so raised by the learned counsel appearing for the parties.
The Apex Court in Smt. Krishnabai Bhritar Ganpatrao Deshmukh Vs.
Appasaheb Tuljaramarao Nimbalkar13, while dealing with the aspects
of interpretation of any deed or documents, has held as under:-
"27. Secondly, there is ample authority for the
proposition that when there is a dispute in regard to the
true character of a writing, evidence de hors the
document can be led to show that the writing was not the
real nature of the transaction, but was only an illusory,
fictitious and colourable device which cloaked something
else, and that the apparent state of affairs was not the
real state of affairs. [See Chandi Prasad Singh v. Piari
Bidi C.A. No. 75 of 1964, decided on 16-3-1966, and
Bhagwan Dayal v. Mst. Reoti Devi (supra) ].
45 While dealing with the effect of various transactions, based
upon the various documents, the Court required to deal with and take
into consideration every connected transactions and the documents, to
11 AIR 1962 SC 1314
12 (2006) 5 SCC 545=AIR 2006 SC 2234
13 (1979) 4 SCC 60
ssm/dgm 50 comap-7-16-judgment-24-10-16-final.sxw
give total effect to the transactions by treating them all as one
document. The Apex Court in (S.Chattanatha Karayalar Vs. The
Central Bank of India Ltd.)14 has observed as under:-
3. .......... "The principle is well established that if the
transaction is contained in more than one document
between the same parties they must be read and
interpreted together and they have the same legal effect
for all purposes as if they are one document. In Manks v.
Whiteley 1912-1 Ch. 735 at p. 754,, Moulton, L.J.
Stated:
"Where several deeds form part of one transaction
and are contemporaneously executed they have the same
effect for all purposes such as are relevant to this case as
if they were one deed. Each is executed on the faith of all
the others being executed also and is intended to speak
only as part of the one transaction, and if one is seeking
to make equities apply to the parties they must be
equities arising out of the transaction as a whole."
Conditional or unconditional leave?
46 The law with regard to Order XXXVII, Rule 2 and 3 of CPC
to grant or not to grant conditional and/or unconditional leave is
elaborated as under, by the Apex Court in M/s. Mechelec Engineers &
Manufacturers Vs. M/s. Basic Equipment Corporation15-
"8. In Sm. Kiranmoyee Dassi v. Dr. J. Chatterjee
(49CWN246, 253 :AIR 1949 Cal 479), Das. J., after a
comprehensive review of authorities on the subject,
stated the principles applicable to cases covered by order
14 AIR 1965 SC 1856
15 (1976) 4 SCC 687
ssm/dgm 51 comap-7-16-judgment-24-10-16-final.sxw
17 C.P.C. in the form of the following propositions (at p.
253) :
(a) 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.
(b) 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 the Defendant is entitled to
unconditional leave to defend.
(c) If the defendant discloses such facts as may
be deemed sufficient to entitle him to defend,
that is to say, although the affidavit does not
positively and immediately make it clear that
he has a defence, yet, shows such a state of facts
as leads to the inference that at the trial of the
action he may be able to establish a defence to
the plaintiff's claim 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 as to payment
into court or furnishing security.
(d) If the defendant has no defence or the
defence set up is illusory or sham or practically
moonshine then ordinarily the plaintiff is
entitled to leave to sign judgment and the
defendant is not entitled to leave to defend.
(e) If the defendant has no defence or the
defence is illusory or sham or practically
moonshine then although ordinarily the
plaintiff is entitled to leave to sign judgment,
the court may protect the plaintiff by only
allowing the defence to proceed if the amount
ssm/dgm 52 comap-7-16-judgment-24-10-16-final.sxw
claimed is paid into court or otherwise secured
and give leave to the defendant on such
condition, and thereby show mercy to the
defendant by enabling him to try to prove a
defence."
"9. The case before us certainly does not fall within the
class (e) set out above. It is only in that class of case that
an imposition of the condition to deposit an amount in
Court before proceeding further is justifiable."
47 The Apex Court in this regard has further reiterated above
principle and on facts as case was made out granted an unconditional
leave. This makes the position of law clear, which need to be kept in
mind while granting and/or refusing leave to defend. The case in
hand, in our opinion, falls within the ambit of clauses (a) and (b) as
expressed in Mechelec Engineers & Manufacturers (supra). [Sunil
Enterprises and Anr. Vs. SBI Commercial & International Bank Ltd. 16 and
State Bank of Saurashtra Vs. Ashit Shipping Services (P) Ltd. 17, R.
Savarna Prabhu and Anr. Vs. Videocon Leasing and Industrial Finance
Limited & Anr.18]
48 The learned Single Judge, S.G. Kathawalla, as recorded in
16 (1998) 5 SCC 354
17 (2002) 4 SCC 736
18 (2013)14 SCC 606
ssm/dgm 53 comap-7-16-judgment-24-10-16-final.sxw
earlier Suit filed by the IDBI, dealt with the same documents and
transactions between the parties and has granted the conditional
leave. Therefore, taking note of the reasons so given and recorded, we
see there is no case to discard these reasons by overlooking the above
basic principles of law. We have to keep in mind the basic principles
so laid down, while considering the present case/Appeal also. We
have taken note of the facts and circumstances, as well as the reasons
given by the learned Single Judge, S.G.Kathawalla, and the Supreme
Court Judgments so referred above, interpreting the transactions and
the documents between the same parties and we are inclined to
observe that a sufficient case is made out by the Appellant that they
have a good defence to claim on its merits. This itself means, in the
trial, they may be able to establish the defence to the Plaintiff's claim
therefore, the Appellant-Defendant, at this stage, is entitled for the
unconditional leave. The discretion so exercised and order so passed
by imposing condition while granting leave, is unsustainable in the
facts and the law and is liable to be interfered with.
49 Therefore, taking overall view of the matter, we are of the
opinion that this is a case where on merit, unconditional leave
required to be granted to the Appellant on similar line as granted by
ssm/dgm 54 comap-7-16-judgment-24-10-16-final.sxw
the learned Single Judge dated 8 May 2015.
50 Therefore, considering the totality of the matter, we are
inclined to pass the following order-
ORDER
a) Appeal filed under Section 13 of the Commercial Courts
Act, is maintainable against the order of grant of
conditional leave directing the parties to furnish the
security/depositing the money in Summary Suit;
b) Impugned Judgment and order dated 6 June 2016 passed
by the learned Single Judge of the Commercial Division in
Summons for Judgment No. 111 of 2011, is quashed and
set aside, as the Defendant has raised the triable issues,
which required adjudication on further evidence at the
time of final disposal of the Suit;
c) Unconditional leave is granted to the Defendant to defend
the above suit;
d) The Suit is transferred to the list of commercial causes and
the Defendant is directed to file its written statement on or
before 28 November 2016;
ssm/dgm 55 comap-7-16-judgment-24-10-16-final.sxw
e) The hearing of the Suit is expedited. The learned Judge
will endeavour to dispose of the Suit within a period of
one year from the date of this order.
f) Place the Suit for framing of issues on 9 January 2017;
g) The Appeal is accordingly disposed of.
h) In view of disposal of the Appeal itself, nothing survives in
Notice of Motion (Lodging) No. 2028 of 2016 and the
same is also disposed of.
i) No costs.
(G.S. KULKARNI, J.) (ANOOP V. MOHTA, J.)
