Delhi High Court

Scb China Ltd vs State Bank Of Patiala & Ors on 6 August, 2014

*      IN THE HIGH COURT OF DELHI AT NEW DELHI
+      FAO(OS) 209/2014
       SCB CHINA LTD                                     ..... Appellant
                          Through       Mr. Sumit Bansal, Mr.Ajay
                                        Monga, Mr. Ateev K. Mathur &
                                        Mr. Devmani Bansal, Advocates

                          versus

       STATE BANK OF PATIALA & ORS          .... Respondents
                    Through  Mr. R.K. Sanghi, Advocate

       CORAM:
       HON'BLE MR. JUSTICE KAILASH GAMBHIR
       HON'BLE MR. JUSTICE NAJMI WAZIRI

                          ORDER

       %                  06.08.2014

KAILASH GAMBHIR, J (ORAL)

1. The present appeal has been preferred by the appellant to assail the

order dated 21.1.2014 passed by the learned Single Judge whereby the

learned Single Judge had granted leave to the respondent to contest the

recovery suit filed by the appellant/plaintiff under Order XXXVII, CPC.

2. The preliminary objection raised by the counsel for the respondent

is with regard to the very maintainability of the present appeal. The stand

of the counsel for the respondent is that the impugned order is not in the

nature of a judgment through which there has been a final determination

of the rights of the parties and therefore, the same is not appealable either

under CPC or under the Letters Patent. In support of his arguments,

counsel for the respondent placed reliance on the decision of the

Constitutional Bench in the case of Shah Babulal Khimji v. Jayaben D.

Kania and Ors., AIR 1981 SC 1786.

3. Mr. Sumit Bansal, counsel for the appellant, on the other hand

submits that the impugned order passed by the learned Single Judge does

affect the rights of the appellant as the learned Single Judge has granted

unconditional leave to the defendants/respondents even in the absence of

any triable issue raised by them in their application. Counsel for the

appellant also submits that the learned Single Judge failed to appreciate

that respondent No.1 had issued a standby Letter of Credit and not a

Letter of Credit as it was sought to be projected, therefore, this

misrepresentation on the part of respondent No.1 itself disentitles

respondent No.1 from seeking any leave to defend to contest the suit.

Counsel for the appellant also argued that the learned Single Judge fell in

grave error by taking a view that the respondents have made out a case of

fraud of egregious nature due to non-supply of goods. The counsel further

contended that the learned Single Judge failed to consider the provisions

of the UCP-500 and the settled legal position that the banks deal in

documents and not in goods. In support of his arguments, counsel for the

appellant, placed reliance on the judgment in the case of UBS AG v. State

Bank of Patiala; AIR 2006 SC 2250.

4. We have heard learned counsel for the parties.

5. In the present appeal, the appellant who is a plaintiff in the suit is

aggrieved by order dated 21.01.2014 passed by the learned Single Judge

whereby leave to defend application filed by the defendants/ respondents

under Order XXXVII of the Civil Procedure Code has been allowed.

6. Counsel for the respondents raised the issue of the maintainability

of the present appeal based on the legal position settled by the Apex

Court in the case of Shah Babulal Khimji (supra).

7. We find ourselves in complete agreement with the contention

raised by the counsel for the respondents. The Apex Court in the said

judgment has taken a clear view that where the Trial Judge in a suit under

Order XXXVII CPC refuses the defendant, leave to defend the suit, such

an order directly affects the defendant because he loses a valuable right to

defend the suit and such an order vitally affects a valuable right of the

defendant and thus, it will undoubtedly be treated as a judgment within

the meaning of the Letters Patent so as to be appealable. The Apex Court

further held that the same would not be true if the Trial Court allowed the

defendant to defend the suit in which case even though the plaintiff would

be adversely affected, the damage or prejudice caused to the plaintiff will

not be direct or immediate and the plaintiff would still possesses his full

right to show that the defence is false and then ultimately succeed in the

suit and therefore, such an order allowing leave to defend would not

amount to a judgment within the meaning of Clause 15 of the Letters

Patent but will be purely, an interlocutory order. We may usefully refer

to relevant paras of the said judgment as under:-

"In other words, a judgment can be of three kinds:

(1) A Final Judgment-a judgment which decides all the questions or issues in controversy so far as the Trial Judge is concerned and leaves nothing else to be decided. This would mean that by virtue of the judgment, the suit or action brought by the plaintiff is dismissed or decreed in part or in full. Such an order passed by the Trial Judge indisputably and unquestionably is a judgment within the meaning of the Letters Patent and even amounts to a decree so that an appeal would lie from such a judgment to a Division Bench

(2) A preliminary judgment-This kind of a judgment may take two forms-(a) where the Trial Judge by an order dismisses the suit without going into the merits of the suit but only on a preliminary objection raised by the defendant or the party opposing on the ground that the suit is not maintainable. Here also, as the suit is finally decided one way or the other, the order passed by the Trial Judge would be a judgment finally deciding the cause so far as the Trial Judge is concerned and therefore appealable to the larger Bench. (b) Another shape which a preliminary judgment may take is that where the Trial Judge passes an order after hearing the preliminary objections raised by the defendant relating to maintainability of the suit, e.g., bar of jurisdiction, res Judicata, a manifest defect in the suit,

absence of notice under Section 80 and the like, and these objections are decided by the Trial Judge against the defendant, the suit is not terminated but continues and has to be tried on merits but the order of the Trial Judge rejecting the objections doubtless adversely affects a valuable right of the defendant who, if his objections are valid, is entitled to get the suit dismissed on preliminary grounds. Thus, such an R order even though it keeps the suit alive, undoubtedly decides an important aspect of the trial which affects a vital right of the defendant and must, therefore, be construed to be a judgment so as to be appealable to larger Bench.

(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. 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. Take the converse case in a similar suit where the trial Judge allows the defendant to

defend the suit in which case although the plaintiff is adversely affected but the damage or prejudice caused to him is not direct or immediate but of a minimal nature and rather too remote because the plaintiff still possesses his full right to show that the defence is false and succeed in the suit. Thus, such an Order passed by the Trial Judge would not amount to a judgment within the meaning of Clause 15 of the Letters Patent but will be purely an interlocutory order."

"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. 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. Take the converse case in a similar suit where the trial Judge allows the defendant to defend the suit in which case although the plaintiff is adversely affected but the damage or prejudice caused to him is not direct or immediate but of a minimal nature and rather too remote because the plaintiff still possesses his

full right to show that the defence is false and succeed in the suit. Thus, such an Order passed by the Trial Judge would not amount to a judgment within the meaning of Clause 15 of the Letters Patent but will be purely an interlocutory order."

8. A Full Bench of this Court in Jaswinder Singh v. Mrigendra

Pritam Vikramsingh Steiner & Ors., reported in 196 (2013) DLT 1

while answering a reference extensively dealt with the said issue and

view taken was that an order passed by the learned Single Judge in

exercise of ordinary civil original jurisdiction is not an appealable order

under Section 104 read with Order XLIII Rule 1 of the Code of Civil

Procedure and in such a case, the remedy would be available under

Section 10 (1) of the Delhi High Court Act, 1966 and not under Clause 15

of the Letters Patent. Relevant paras of the said judgment are reproduced

as under:-

" We are of the view that principles enunciated in Shah Babulal Khimji case (supra) as to what would constitute an appealable judgment/order must equally apply to Section 10 of the said Act so that if an order, which is not an appealable order under the said Code, but otherwise satisfies the tests as laid down in Shah Babulal Khimji case (supra), in other words effects vital and valuable rights or, is an order which, decides matters of moment; the remedy of appeal to the Division Bench would equally be available.

We, thus, conclude by laying down the following principle of law:

In case of an order passed by the learned Single Judge in exercise of ordinary original civil jurisdiction in case of a non-appealable order under Section 104 read with Order 43 of the said Code which meets the test of a "judgment" that decides matters of moment or affects vital and valuable rights of parties and which works serious injustice to the parties concerned as per the parameters laid down in Shah Babulal Khimji case (supra) by the Supreme Court, an appeal to the Division Bench would exclusively lie under Section 10 of the said Act and not under Clause 10 of the Letters Patent."

9. In the judgment of UBS AG v. State Bank of Patiala (supra) cited

by counsel for the appellant, an objection was raised that the appeal

would not be maintainable against an order granting leave to defend, as

such an order did not amount to a judgment, against which an appeal

would lie. The Hon'ble Supreme Court while reiterating the principles

enunciated in Shah Babulal Khimji (supra) took a view that the said

principles which applies to the Letters Patent will not apply to an appeal

for which special leave is granted under Article 136 of the Constitution of

India.

10. The legal position thus, is no more res integra and the legal

principles which were settled in Shah Babulal Khimji (supra) continue to

hold the field and our attention has not been drawn by the counsel for the