Badat and Co. Vs. East India Trading Co. [1963] INSC 148 (10 May 1963)
10/05/1963 SUBBARAO, K.
SUBBARAO, K.
DAYAL, RAGHUBAR MUDHOLKAR, J.R.
CITATION: 1964 AIR 538 1964 SCR (4) 19
CITATOR INFO:
R 1970 SC 522 (6) D 1977 SC2002 (6) RF 1978 SC 389 (51)
ACT:
Foreign Award and Judgment-Suit filed in Bombay High Courtjurisdiction of Court to entertain the suit based on such documents.
HEADNOTE:
The respondent company, which was incorporated in New York and carried on business in spices, brought a suit in the original side of the Bombay High Court against the appellant for recovery of a sum of Rs. 92,884-4-10 on the basis of a judgment of the Supreme Court of the State of New York affirming two awards obtained by it and also on the awards in the alternative.
20 The respondent was a partnership firm carrying on import and export business in Bombay. By two letters exchanged between them, the appellant and the respondent agreed to do business in turmeric fingers on the terms and conditions of the American Spice Trade Association, one of which was an arbitration clause which ran as follows :"All questions and controversies and all claims arising under this contract shall be submitted to and settled by Arbitration under the Rules of the American Spice Trade Association printed on the reverse side thereof.
This contract is made as of in New York." The appellant failed to supply turmeric in terms of the two contracts it entered into with the respondent. The respondent put the matter into arbitration in pursuance of the arbitration clause. The appellant took no part in it.
The arbitrators gave the two awards in favour of the respondent for damages. The appellant did not pay. The respondent then took appropriate proceedings and got the awards confirmed by the judgment of the Supreme Court of the State of New York. The single judge of the Bombay High Court who tried the suit held that it was not maintainable either on the foreign judgment or on the awards and (dismissed the suit. The Division Bench on appeal held that the suit was maintainable on the awards, though not on the judgment, as part of the cause of action had arisen in Bombay and the relevant facts had been proved by the Public documents produced by the respondent and the admissions made by the appellant and decreed the suit.
Held, (per Dayal and Mudholkar JJ.) The decision of the Single judge of the High Court that the suit was not maintainable on the foreign judgment must be affirmed but on other grounds.
Apart from the provisions of the Arbitration Protocol and Conventions Act, 1937, foreign awards and foreign judgments based upon award arc enforceable in India on the same grounds and in the same circumstances in which they are enforceable in England under the Common Law on grounds of justice, equity and good conscience. On the original side of the Bombay High Court English Common Law is also applicable under cl. 19 of the Letters Patent read with cl. XLI of the Charter of that Court.
If the award is followed by a judgment which is rendered in a proceeding in which the person against whom judgment is sought can take objections as to the validity of the award, the judgement will be enforceable in England. Even then the plaintiff will have the right to sue on the original course of action. Secondly, even a foreign award will be enforced only if it satisfies mutate's mutandis the tests applicable to the enforcement of foreign judgments on the ground that it creates a contractual obligation arising out of submission to arbitration. But there is a difference of opinion in this connection on two matters, (1) whether an award which 21.
is followed by a judgment can be enforced as an award or whether the judgment alone can be enforced, and (2) whether an award which is not enforceable in the country in which it was made without an enforcement order or a judgement, can be enforced or in such a case the only remedy is to sue on the original cause of action. Thirdly, both a foreign judgment and a foreign award may be sued upon provided certain conditions are fulfilled one of which is that it has become final.
Although, therefore, the respondent could sue on the original cause of action in the Bombay High Court that cause of action must be distinguished from the one furnished by the 'judgment of the New York Supreme Court which must be held to have arisen in New York and not in Bombay and was a cause of action independent of the one afforded by the contracts and the Bombay High Court would, consequently, have no jurisdiction to try the suit based on that judgment.
East India Trading Co. v. Carmel Exporters & Importers Ltd., (1952) 2 Q. B. 439, Schibsby v. Westenholz., (1870) 6 Q. B 155 and Re Davidson's Settlement Trust, (1873) L. R. 15 Eq.
383, referred to.
In a suit based on a foreign award the plaintiff has to prove,. (1) that the contract between the parties provided for arbitration by a tribunal in a foreign country, (2) that the award is in accordance with the agreement, (3) that the award is valid according to the law of that country (4) that it was final according to that law and, (5) that it was subsisting award at the date of the suit.
The essential difference between a foreign judgement and 2 foreign award is that while the former is a command of the foreign, sovereign and the coming of nations accords international recognition to it if it fulfill certain basic requirements, the latter is founded on the contract between the parties and is not given the status of a judgment in the country in which it is made 'and cannot claim the same international status as the act of a foreign sovereign.
Even though an award may not have obtained the status of judgment in the country in which it is made, if it possesses the essential attribute of a judgment, that is finality, it can be sued upon in in other country.
Union Nationaledes Cooperatives Agricoles de Careales v. Robert Catterall & Co. Ltd.' (1959) 2 Q. B. 44, referred to.
But the finality that r. 15, cl. (E) of the American Spice Trade Association gives to the awards in question is no more than a matter of contract between the parties and must be subject to the law of the State.
A reference to the laws of the State of New York makes it abundantly clear that the relevant provisions of the laws of the 22 State under which alone the awards could become final had not been complied with and they could not, therefore, provide a cause of action for the suit.
For an award to furnish a fresh cause of action, it must be final. If the law of the country in which it was made gives finality to the judgment based on an award and not to the award itself, the award cannot furnish a cause of action in India. Although the High Court of Bombay has jurisdiction to enforce a final award made in a foreign country in pursuance of a submission made within the limits of its original jurisdiction, the awards in question not being final the suit must fail.
Per Subba Rao J.-The doctrine of non-merger of the original cause of action with the foreign judgment pronounced upon it is a well established doctrine.
Popat v. Damodar, (1934) 36 B.L.R. 844, Oppenbeim and Co. v. Mohmed Haneef, (1922) I.L.R. 45 Mad. 496 and Nil Ratan Mukhopahya v. Cooch Behar Loan Office, Ltd. I.L.R. (1941) 1 Cal. 171, referred to.
If the contract does not merge in the judgment, by a parity of reasoning an award on which a foreign judgment is passed cannot also merge in the judgment.
There is no distinction between a foreign award which would require an enforcement order to be enforceable in law and an award which cannot be enforced except by a judgment. An enforcement order as well as a judgment on an award serves the same purpose and they are two different procedures for enforcing, an award.
Meerifield Ziegler & Co. v. Liverpool Cotton Association Ltd., (1911) 105 L.T.R. 97, referred to.
A suit would, therefore, lie on a foreign award completed according to the law of that country and before a decree can be passed on it three things must be proved, (1) arbitration agreement, (2) that the arbitration was conducted in accordance with the agreement, and (3) that the award was valid according to the law of the country when it was made.
Norske Atlas Insurance Co. Ltd. v. London General Insurance Company Limited. (1927) 43 T.L.R. 541, referred to.
It was not correct to say that the High Court had gone wrong in holding that the three necessary conditions had been proved by the admission of the appellants in their pleadings.
Rules 3, 4 and 5 of the Order VIII of the Code of Civil -Procedure form an integrated code dealing with the manner in ,which the allegations of fact made in a plaint has to be traversed :and the legal consequences that follow from its non-compliance.
23 The written statement must deal specifically with each allegation of fact made in the plaint and if the defendant denies any such fact, such denial must not be evasive, he must answer the point of substance and if he fails to do so the said fact must be take to be admitted.
The discretion under the proviso to r. 5 has to be exercise by the court as justice demands and particularly according to the nature of the parties, standard of drafting prevailing in the locality and the practice of the court.
There can be no doubt that pleadings on the original side of the Bombay High Court have to be strictly construed in the light of the said provisions unless the court thinks fit to exercise it discretion under the proviso.
Tildesley v. Harper, (1878) L.R. 7 Ch. D. 403 and Laxmi narayan v. Chimniram Girdharilal, (1917) I.L.R. 41 Bom.-89 referred to.
The said three conditions were also proved by the exhibited record of the proceedings of the Supreme Court of New York containing the certificate of the Consul General of India in New York and certified copies of the order and judgment of the Supreme Court.
While under s. 78(6) of the Indian Evidence Act, proof of the character of the document according to the law of the foreign country, is condition precedent to its admission, such admission is not a condition precedent for drawing the requisite presumption under s. 86 of the Act. That presumption can be drawn before the document is admitted.
The judgment of the Supreme Court of New York, therefore, which satisfied the first two conditions laid down by s. 78(6), could be legitimately admitted into evidence.
The contracts between the parties having been concluded within the local limits of the original jurisdiction of the Bombay High Court, a part of the cause of action must have arisen there. and that court had jurisdiction to try the suit on the awards.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 39 of 1961.
Appeal from the judgment and decree dated September, 1958 of the Bombay High Court in Appeal No. 13 of 1958.
C.K. Daphtary, Solicitor-General of India, S.N. Andley, Rameshwar Nath, P.L. Vohra and I. B. Dadachanji, for the appellant.
M. C. Setalvad, Atul Setalvad, V.I. Merchant and G. Gopalkrishnan, for the respondent.
24 May 10, 1963.-Subba Rao J., delivered a dissenting Opinion.
The judgment of Dayal and Mudholkar JJ., was delivered by Mudholkar J. SUBBA RAO J.-I regret my inability to agree with the judgment prepared by my learned brother Mudholkar J. This appeal by certificate raises the question of 'Jurisdiction of the Bombay High Court to entertain a suit on an award in respect whereof a judgment was made in a foreign court and other incidental questions.
The facts that have given rise to the present appeal may be briefly stated. I shall only narrate such facts which are relevant to the question raised, for in the pleadings a wider field was covered, but it has gradually been narrowed down when the proceedings reached the present stage. The appellants are Badat & Co., a firm formerly carrying on business at Bombay. The respondents, East India Trading Co., are a private limited company incorporated under the laws of the State of New York in the United States of America and having their registered office in the State of New York. The respondents instituted Suit No. 71 of 1954 against the appellants in the High Court of judicature at Bombay, in its Ordinary Original Civil Jurisdiction, for the recovery of a sum of Rs. 92,884/4/10 with interest thereon.
It was alleged in the plain that by correspondence, the details whereof were given in the plaint, the appellants agreed to do business with the respondents on the terms of the American Spice Trade Association contract. Thereafter, by subsequent correspondence the parties entered into two different contracts where under the appellants agreed to sell to the respondents different quantities of Allepey Turmeric Fingers on agreed terms. Though the respondents forwarded to the appellants in respect of the said transactions two contracts in duplicate on the standard form issued by the said Trade Association with a request to the appellants to send them after having duly signed, the appellants failed to do so. Under the terms and conditions of the said Trade Association Contract, all claims arising under the contract should be submitted to, and settled by, arbitration under the rules of the said Association. it was stated that pursuant to a relevant rule of the 25 said Association, the dispute was referred to arbitration and two awards were made in due course i.e., on July 12, 1949. Following the procedure prescribed for the enforcement of such awards in New York, the respondents initiated proceedings in the Supreme Court of the State of New York to have the said awards confirmed and a judgment entered thereon in the said Court. In due course, the said Court pronounced judgment confirming the said awards. On those allegations a suit was filed in the High Court of Bombay for recovery of the amounts payable under the said two awards by the appellants to the respondents. The suit was tried, in the first instance, by Mody J. The learned judge, inter alia, held that the suit on the foreign judgment would not lie in the Bombay High Court, as there was no obligation under the said judgment for the appellants to pay any amount to the respondents at any place within the jurisdiction of the Bombay High Court. Adverting to the claim based on the agreement resulting in the awards, the learned Judge observed that there was no proof of such agreement and that there were no admissions in the written statement in regard to the facts sustaining such an agreement. On those findings he held that the respondents had failed to prove that the Bombay High Court had jurisdiction to try the suit. As the suit was heard on merits also, he considered other issues and held that there was neither proof nor admissions in the written-statement in regard to the alleged contracts. He found that the arbitrators and the umpire had jurisdiction to make the awards, but the said awards merged in the judgment and that the suit was not maintainable on the said two awards. It is not necessary to give the other findings of the learned judge, as nothing turns on them in the present appeal. In the result. the suit was dismissed with costs. On appeal, a division Bench of the said High Court, consisting of Chagla C.J. and S. T. Desai J., disagreed with Mody J., on the material questions decided by him and allowed the appeal with costs. The learned judges held that the awards did not merge in the judgment, that the suit on the awards was maintainable and that the Bombay High Court had jurisdiction to entertain the suit as part of the cause of 3-2 S. C. India/64 26 action arose within its limits. The learned Judges further held that all the facts necessary to sustain the respondents' suit on the awards had been proved either by public documents produced in the case or by the admissions made by the appellants in the written-statement. The present appeal, as aforesaid, has been preferred by certificate against the judgment of the division Bench.
The learned Solicitor General, appearing for the appellants, raised before us the following points : (1) The awards merged in the judgment made by the Supreme Court of the State of New York and, therefore, no suit would lie on the awards. (2) Even if the suit could be filed on the awards, it was not proved that any part of the cause of action accrued within the jurisdiction of the Bombay High Court.
To state it differently, the respondents have not proved that the agreements resulting were entered into or concluded within of the Bombay High Court. And (3) failed to prove the three necessary enforcement of the awards namely, (i) an arbitration agreement, (ii) that the conducted in accordance with the agreement, and (iii) that the awards were made pursuant to the provisions of the agreement and, therefore, valid according to the lex fori of the place where the arbitration was carried out and where the awards were made.
Mr. Setalvad appearing for the respondents, sought to sustain the findings of the Division Bench of the High Court given in favour of the respondents on the said questions raised by the appellants.
The first question is whether the awards merged in the judgment of the Supreme Court of the State of New York for all purposes; if so, the awards would lose their individuality or separate existence and no suit could, therefore, be filed to enforce them. In Halsbury's Laws of England, Vol. 7, 3rd Edn., at p. 141, the relevant principle is stated under the heading "Foreign judgments" thus:
" Since the foreign judgment constitutes a simple contract debt only, there is no merger of the original cause of action, and it is therefore open to the plain27 tiff to sue either on the foreign judgment or on the original cause of action on which it is based, unless the foreign judgment has been satisfied." The same idea is expressed in Dicey's "Conflict of Laws", 7th edn., at p. 1059:
"For historical and procedural reasons, a foreign judgment is treated in England as a contractual debt, and the fact that, in certain instances, it can be enforced by registration does not appear to alter the traditional view." Though the learned author in the course of his commentary criticizes this view, the passage represents the accepted view on the subject. An interesting discussion of the evolution of the rule of non-merger of the cause of action in the foreign judgment is found in Piggott's "Foreign judgment", Part I at p. 17. The various steps in its evolution may be stated thus : (1) Action brought on a foreign judgment was an action brought to recover the judgment debt :...... necessarily then, the judgment must be evidence of the debt. (2) It was not made clear which debt it evidenced, whether it was the judgment debt or the original debt. (3) As it was an action on a debt, an action on the judgment debt soon came to be confused with, and perhaps looked upon as, an action on the original debt. (4) Having come to that stage, the courts declared that the original debt or cause of action had not merged in the foreign judgment pronounced upon it. Whatever may be the origin, the doctrine of non-merger of the original cause of action with the foreign judgment has now been well established in spite of the fact that some text-book writers are not able to discover a logical basis for the doctrine. In "Smith's Leading Cases", the learned author says:
"Foreign judgments certainly do not occasion a merger of the original ground of action." In Cheshire's Private International Law, 5th Edn., the learned author says in Ch. XVII under the heading "Foreign Judgments", thus, at p. 598 :
"It is a rule of domestic English law that a plaintiff who has obtained judgment in England against a defendant is barred from suing again on the original cause of action. The original cause of action is merged in the judgment-transit in rem judicatumand it would be vaxatious. to subject the defendant to another action for the purpose of obtaining the same result. It has been held, however, in a series of authorities, that this is not so in the case of foreign judgments.
Such a judgment does not, in the view of English law, occasion a -merger of the original cause of action, and therefore the plaintiff has his option, either to resort to the original ground of action or to sue oil the judgment recovered, provided of course, that the judgment has not been satisfied." The learned author gives the following different reason for this distinction between a foreign and a domestic judgment, at p. 599 :
"The most plausible justification for non merger, perhaps, is that a plaintiff suing in England on a foreign judgment, as contrasted with one who sues on an English, judgment possesses no higher remedy than he possessed before the foreign action. The effect of judgment in English proceedings is that "the cause of action is changed into matter of record, which is of a' higher nature, and the inferior remedy is merged in the higher" ; but the view which English law takes of a foreign judgment is that it creates merely a simple contract debt between the parties. The doctrine of non-merger has. however, been too often repeated by judges to justify any prospect of its abandonment." This doctrine has been accepted and followed by Indian Courts: see Popat v. Damodar('), Oppenheim and Company v. Mahomed HanEef(2) and Nil Ratan Mukhopadhyaya v. Cooch Behar Loan Office, Ltd.(').
If the contract does not merge in a judgment, by parity of reasoning, the award on which a foreign judgment is made cannot also merge in the judgment. While conceding the said legal position, the learned counsel for the appellant contends that the award to furnish a valid cause of action shall be one which is legally enforceable in the country in which it is made. An award made in (1) (1934) 36 B.L.R. 844, 853.
(2) (1922) I.L.R. 45 Mad. 496.
(3) I.L.R. (1941) 1 Cal. 171, 175.
29 New York, the argument proceeds, by its own force does not create rights or impose liabilities there under and therefore, such an inchoate document cannot afford a cause ,of action. This contention has not been raised for the first time, but has been noticed in "Russel On Arbitration", 16th Edn. and answered it p. 282. The learned author places the following two propositions in juxtaposition : (1) "An award made by foreign arbitrators, which requires an enforcement order to render it enforceable by the local law, is not a judgment of a foreign tribunal which can be enforced by action in English courts". (2) "But an award which is complete and could be enforced in the country where it was made is enforceable in England at Common Law quite apart from any rights given by Part 11 of the Act." In Halsbury's Laws of England, Vol. 11 3rd edn., the following note is given at p. 52 :
"A foreign arbitration award which is complete and enforceable in the country in which it was made is enforceable in England at Common Law." The learned Solicitor-General seeks to (]raw a subtle distinction between an award made by foreign arbitrators which require an enforcement order to render it enforceable by the local law and an award which could not be enforced except by obtaining a judgment on its basis. On this distinction an argument is advanced, namely, that in the case of the former the award has been vitalized by, the enforcement order, while in the case of the latter the award qua the Judgment has not become enforceable, but it is the judgment that becomes enforceable. In support of this contention reliance is placed upon the following, observations found in Dicey's Conflict of Laws, 17th edn., at p. 1059 :
"If the foreign award is followed by judicial proceedings in the foreign country resultants in a judgment of the foreign court which it not merely a formal order giving leave to enforce the award, enforcement proceedings in England must be brought on the foreign judgment (or possibly on the original cause of action), but probably not on the award." These observations are not supported by any direct decision, they represent only the author's doubts on the 30 question. On principle 1 cannot see why a distinction should be made between the two categories of cases. An enforcement order as well as a judgment on an award serves the same purpose : they are two different procedures prescribed for enforcing an award. In the case of an enforcement order a party applies to a court for leave to enforce the award ;
and on the granting of such leave, the award can be enforced as if it were a decree of a court. In the alternative procedure. an action either ill the shape of a suit or a petition will have to be filed on an award and a judgment obtained thereon. In that event, the award, vis-a-vis the country in which it is made, merges in the judgment and thereafter the judgment only becomes enforceable. But, as explained earlier, there is no merger in the context of its enforcement in another country. In both the cases the award in the country of its origin is complete and enforceable.
If an award gets vitality by a mere enforcement order, it gets a higher sanctity by the court of its origin making a judgment on it. Both of them afford a guarantee of its vitality and enforceability in the country of its origin and, therefore, a different country can safely act upon it.
In both the cases the award is complete in the country of its origin and if the doctrine of merger cannot be invoked in the case of foreign judgment, as I have held it cannot, there is no principle on which the distinction sought to be made can be sustained. To sanction the distinction in the context of a foreign judgment is to prefer the form to substance and to accept a lesser guarantee and reject a higher one. The decision in Merrifield, Ziegleis-, and Co., v. Liverpool Cotton -Association Limited(1) does not lay down any different proposition. There, the plaintiff brought an action in England against Liverpool Cotton Association for restraining the said Association from expelling them from membership of the Association. The Association filed a counter claim demanding a large amount from the plaintiffs payable by them under an award made in Germany. The claim was based on the award and in effect it was a claim to enforce the award. By German Law an enforcement order (1) (1911) 105 L.T.R. 97, 106.
31 was necessary before an award can be enforced. But no such order was made there. The High Court rejected the counter claim. In doing so, it made the following observations :
"The sole point, therefore, remains whether the award is a decision which the court here ought to recognise as a foreign judgment. In my opinion it is not, although as between the parties it is conclusive upon all matters thereby adjudicated upon, and is therefore in a different category to the "remate" judgment dealt with by the House of Lords in Nouvin v.
Freeman(1) ; it has no further force or effect unless and until the court determines that it is an adjudication made in proceedings regularly conducted upon matters really submitted to the jurisdiction of the tribunal.
It is not even as though the award were enforceable unless the court stays its operation ; the contrary is really the case, and for all practical purposes it is stillborn until vitality is infused into it by the court. It is then, for the first time, endowed with one, at least, of the essential characteristics of a judgment-the right to enforce obedience to it." This passage in clear terms brings out the principle underlying the proposition that an award cannot afford a cause of action till it is complete in the country of its origin. The reason of the rule is that unless and until tile appropriate court determines its regularity, it is inchoate and it becomes enforceable only when an enforcement order or judgment puts its seal of approval on it. For the application of this principle the distinction between an enforcement order and a judgment on the award is not material. In either case, the Court approves it. Indeed, the Judicial Committee in Oppenheim & Co. v. Mahomed Hanef(2) sanctioned the maintainability of a suit to enforce an award which ended in a judgment. There, in respect of a mercantile dispute that arose between merchants carrying on business in London and a merchant at Madras, an award was obtained in England. The merchants in England filed a suit on (1) (1889) 15 App. Cas. 1.
(2) (1922) I.L.R. 45 Mad. 496.
32 the award on the King's Bench Division of the High Court in England for the amounts payable there under and obtained an ex-parte judgment against the merchant at Madras.
Thereafter, they brought a suit against the Madras merchant in the High Court of judicature at Madras claiming the sum due under the said judgment, or in the alternative, for the amount due under the award. Coutts Trotter J., who heard the case in the first instance, held that the suit was not maintainable on the judgment that was an ex-parte one, and gave a decree on the award. But on appeal, a Division Bench. of that Court took a different view. On further appeal, the Privy Council restored the decree made by Coutts Trotter J. : but they concluded their judgment with the following caution :
"In order to prevent misconception, it appears desirable to add that it was not pleaded or contended at any stage of the proceedings that the award had merged in the English judgment, and accordingly their Lordships do not deal with that point." This decision is certainly an authority for the position that on the assumption that an award does not merge in a foreign judgment, it affords a cause of action in another country. I have already indicated earlier on the same reasoning applicable to the doctrine of non-merger of a contract in a foreign judgment that an award also will not merge. For the reasons given by me, I hold that a suit would lie on the basis of an award in a foreign country, provided it is completed in the manner prescribed by the law of that country.
I shall now take the third question, for the discussion thereon would also solve the problem raised by the second question. The learned Solicitor-General contends that there is no proof of the facts to satisfy the aforesaid three conditions and the Division Bench of the High Court went wrong in holding to the contrary on the basis of the alleged admissions found in the pleadings. Mr. Setalvad, learned counsel for the respondents, on the other hand, while conceding that the said three conditions must be satisfied before a foreign award can be enforced, argues that the relevant facts were proved not only by the admissions made by the appellants in the written-statement, ex33 pressed or implied, but also by the production of the certified copy of the judgment of the foreign court.
In Norake Atlas Insurance Co. Ltd. v. London General Insurance Company Limited(1), in award made in Norway was sought to be enforced in England. Action was brought not on the contract but on the award. MacKinnon J., laid down in that case that three things had to be proved for obtaining a decree thereon, namely, (1) the submission ; (2) the conduct of the arbitration in accordance with the submission ; and (3) the fact that the award was valid according to the law of the country where it was made. So too, in Halsbury's Laws of England, 3rd edn., Vol. 11, in para 116, at p. 53, the said conditions of enforcement are given with further elaboration. I need not pursue this matter, as there is no dispute on this aspect of the question.
Have the conditions been proved in the present case? I shall first take the arguments based on the pleadings. Before doing so, it would be convenient to read the relevant provisions of the Code of Civil Procedure on the subject, as the arguments turn upon the application of those provisions to the pleadings.
Order VII of the Code of Civil Procedure prescribes, among others, that the plaintiff shall give in the plaint the facts constituting the cause of action and when it arose, and the facts showing the court has jurisdiction. The object is to enable the defendant to ascertain from the plaint the necessary facts so that be may admit or deny them. Order VIII provides for the filing of a written statement, the particulars to be contained therein and the manner of doing so ; rules 3, 4 and 5 thereof are relevant to the present enquiry and they read :
Order VIII Rule 3. It shall not be sufficient for a defendant in his written statement to deny generally the grounds alleged by the plaintiff, but the defendant must deal specifically with each allegation of fact of which he does not admit the truth, except damages. r. 4 Where a defendant denies an allegation of fact in the plaint, he must not do so evasively, but answer the point of substance. Thus if it is alleged that he (1) (1927) 43 T.T.R. 541.
34 received a certain sum of money, it shall not be sufficient to deny that he received that particular amount, but he must deny that he received that sum or any part thereof, or else set out how much he received. And if an allegation is made with diverse circumstances, it shall not be sufficient to deny it along with those circumstances.
Rule 5. Every allegation of fact in the plaint, if not denied specifically, or by necessary implication, or stated to be not admitted in the pleading of the defendant, shall be taken to be admitted except as against a person under disability.
Provided that the Court may in its discretion require any fact so admitted to be proved otherwise than by such admission.
These three rules form an integrated code dealing with the manner in which allegations of fact in the plaint should be traversed and the legal consequences flowing from its noncompliance. The written-statement must deal specifically with each allegation of fact in the plaint and when a defendant denies any such fact, he must not do so evasively, but answer the point of substance. If his denial of a fact is not specific but evasive, the said fact shall be taken to be admitted. In such an event, the admission itself being proof, no other proof is necessary. The first paragraph of r. 5 is a re-production of O.XIX, r. 13, of the English rules made under the Judicature Acts. But in mofussil Courts in India, where pleadings were not precisely drawn, it was found in practice that if they were strictly construed in terms of the said provisions, grave injustice would be done to parties with genuine claims. To do 'Justice between those parties, for which Courts are intended, the rigor of r. 5 has been modified by the introduction of the proviso thereto. Under that proviso the Court may, in its discretion, require any fact so admitted to be proved otherwise than by such admission. In the matter of mofussil pleadings, Courts, presumably relying upon the said proviso, tolerated more laxity in the pleadings in the interest of justice. But on the Original Side of the Bombay High Court, we are told, the pleadings are drafted by trained lawyers bestowing serious thought and with precision. In construing such pleadings the proviso can be invoked only in exceptional 35 circumstances to prevent obvious injustice to a party or to relieve him from the results of an accidental slip or omission, but not to help a party who designedly made vague denials and thereafter sought to rely upon them for non suitng the plaintiff. The discretion under the proviso must be exercised by a Court having regard to the Justice of a cause with particular reference to the nature of the parties, the standard of drafting obtaining in a locality, and the traditions and conventions of a Court wherein such pleadings are filed. In this context the decision in Tildestey v. Harper(1) will be useful. There. in an action against a lessee to set aside the lease granted under a power the statement of claim stated that the donee of the power had received from the lessee a certain sum as a bribe, and stated the circumstances; the statement of defence denied that sum had been given, and denied each circumstance, but contained no general denial of a bribe having been given. The Court held, under rules corresponding to the aforesaid rules of the Code of Civil Procedure , that the giving of the bribe was not sufficiently denied and therefore it must be deemed to have been admitted. Fry J. posed the question thus : What is the point of substance in the allegations in the statement of claim ? and answered it as follows :
"The point of substance is undoubtedly that a bribe was given by Anderson to Tildesley, and that point of substance is nowhere met............ no fair and substantial answer is, in my opinion, given to the allegation of substance, namely that there was a bribe. In my opinion it is of the highest importance that this rule of pleading should be adhered to strictly, and that the Court should require the Defendant, when putting in his statement of defence, and the Plaintiff, when replying to the allegations of the Defendant, to state the point of substance, and not to give formal denials of the allegations contained in the previous pleadings without stating the circumstances. As far as I am concerned, I mean to give the fullest effect to that rule.
I am convinced that it is one of the highest benefit to suitors in the Court." (1) (1878) L.R. 7Ch. D. 403.
36 It is true that in England the concerned rule is inflexible and that there is no proviso to it as is found in the Code of Civil Procedure . But there is no reason why in Bombay on the original side of the High Court the same precision in pleadings shall not be insisted upon except in exceptional circumstances. The Bombay High Court, in Laxminarayanan v. Chimniram Girdhai Lal(1), construed the said provisions and applied them to the pleadings in a suit filed in the court of the joint Subordinate Judge of Ahmednagar. There the plaintiffs sued to recover a sum of money on an account stated. For the purpose of saving limitation they relied in their plaint upon a letter sent by the defendant-firm. The defendants in their written statement stated that the plaintiffs's suit was not in time and that "the suit is not saved by the letter put in from the bar of limitation". The question was raised whether in that state of pleadings, the letter could be taken as admitted between the parties and, therefore, unnecessary to be proved. Batchelor, Ag. C. T., after noticing the said provisions, observed "It appears to us that on a fair reading of paragraph 6, its meaning is that though the letter put in by the plaintiff is not denied the defendants contend that for one reason or another its effect is not to save the suit from the bar of limitation. We think, therefore, that...... the letter, Exhibit 33, must be accepted as admitted between the parties, and therefore, unnecessary to be proved." The written statement before the High Court in that case was one filed in a court in the mofussil ; yet, the Bombay High Court implied the rule and held that the letter need not be proved aliunde -is it must be deemed to have been admitted in spite of the vague denial in the written statement. 1.
therefore, hold that the pleadings on the original side of the Bombay High Court should also be strictly construed, having regard to the provisions of rr. 3, 4 and 5 of Order VIII of the Code of Civil Procedure , unless there are circumstances wherein a Court thinks fit to exercise its discretion under the proviso to r. 5 of O.VII.
The first condition for the enforceability of an award (1) [1917] I.L.R. 41 Bom. 89, 93.
37 is the proof of submission to arbitration. A claim based on an award is in effect a claim to enforce the award on the footing that the submission implied a contract to give effect to the award. In the plaint the details of the preliminary contract between the parties containing an arbitration clause has been specifically and precisely stated in paras 2 and 3. As much of the argument turns upon the said allegations, it may conveniently be read here.
"2. By their letterdated 7th September 1948 the plaintiffs intimated to the defendants that they were prepared to do business with them on the terms of the American Spices Trade Association contract, net landed weights, less 1-1/2 per cent. discount, letter of credit to be opened for 95 per cent. of the amount of the transaction and the balance to be settled immediately after the goods were weighed and delivered and if there was any difference in the plaintiffs' favour the same was to be remitted to them by the defendants by telegraph. By their letter dated 13th September, 1948 the defendants agreed to the said terms. Thereafter by their cable dated 3rd March, 1949 the defendants offered to sell to the plaintiffs 30 tons of Alleppey Turmeric Fingers at 221 cents per lb. C. & F. New York less 2 per cent March/April shipment. On the same day the plaintiffs cabled to the defendants their acceptance of the said offer.
By their cable dated 7th March, 1949 the defendants offered to sell to the plaintiffs further 30 tons of Alleppey Turmeric Fingers at 22 cents per lb. C. & F. New York less 2 per cent March/April shipment. On the same day the plaintiffs cabled to the defendants their acceptance of the said offer. By their letter dated 8th March 1949 the defendants confirmed the said contract arrived at between the parties on 3rd March, 1949. By their letter dated 9th March, 1949 the plaintiffs confirmed both the said contracts and further intimated to the defendants that they had opened the necessary letters of credit. The plaintiffs forwarded to the defendants in respect of the said transactions two contracts in duplicate on the standard form issued by the said American Spice Trade Association with a request to the defendants to return to the plaintiffs a copy of each of them 38 after signing the same. The defendants, however, failed and neglected to do so. The plaintiffs crave leave to refer to and rely upon the cables and letters above referred to and standard form of contract issued by the said American Spice Trade Association, when produced." "3. The plaintiff say that the standard form of contract issued by the said American Spice Trade Association is known in the spice and herb market as "The American Spice Trade Association Contract" and contains terms and conditions on which the defendants had agreed to do business with the plaintiff as aforesaid. The plaintiff further say that the said standard form of contract is in common use with firms dealing in spices and herbs both in the New York market and elsewhere.
The plaintiff further say that the defendants have been dealing in spices and herbs with American firms in the United States and also on the United States market and had previously entered into several American Spice Trade Association Contracts and were well aware of and knew what the terms and conditions of the said American Spice Trade Association Contract were. One of the said terms was as follows :"All questions and controversies and all claims arising -under this contract shall be submitted to and settled -by Arbitration under the Rules of the American Spice Trade Association printed on the reverse side hereof. This contract is made as of in New York." Then the plaint proceeds to give how the dispute should be referred to arbitration and how arbitrators and umpire should be appointed by the parties. From the said allegations in the plaint it is clear that the plaintiffs have precisely -and definitely given the particulars of the correspondence that passed between the parties on the basis of which they claimed the preliminary contract containing an agreement to submit their dispute to arbitration and the subsequent contracts in respect of the goods made and concluded between the parties.
The defendants, adverting to the said allegations dealt with them in paragraphs 7 and 8 of their written statement. The said paragraphs read :
"7. With reference to paragraph 2 of the plaint the defendants deny that they at any time entered into any contract with the plaintiff as alleged in the said paragraph or otherwise. The defendants deny that they at any time signed or were bound to sign a standard form of contract issued by the American Spice Trade Association."
8. With reference to paragraph 3 of the plaint, the defendants deny that they at any time agreed to do any business or enter into any contract with the plaintiffs as alleged therein or otherwise. The defendants say that they did not at any time sign nor were they bound to sign the said American Spice Trade Association Contract and that they are not therefore bound by or concerned with the terms and/or conditions of the said contract. The defendants deny the rest of the statements contained in the said paragraph." It will be seen from the said paragraphs that though the defendants denied that at any time they entered into a contract with the plaintiffs as alleged in the plaint or otherwise, they have not denied that the letters particularized in the plaint passed between the parties.
Learned Solicitor General relied upon the expression "as alleged" in paragraphs 7 and 8 of the written statement and contended that the said words implied necessarily that the defendants denied the passing of the correspondence. No such necessary implication can arise from the use of the said expression. That expression is consistent with the admission bv the defendants of the passing of the letters mentioned in paragraphs 2 and 3 of the plaint, coupled with a denial that such correspondence does not constitute a binding contract between them. Indeed, rr. 3 and 4 of 0. VIII are aimed at such general allegations in written statements. Rule 3 demands that each allegation of fact made -in the plaint must specifically be denied and r. 4 emphasizes that such a denial shall be of the point of substance and shall not be vague. Here, in the plaint the contents of the letters dated September 7, 1948, September 13, 1948, March 8, 1949 and March 9, 1949 are given and it is specifically stated that they passed between the parties.
Nowhere in the written statement there is a denial as regards the 40 passing of the letters or the contents of those letters.
The general and vague allegations in the written statement cannot possibly be construed, expressly or by necessary implication, as a denial of the specific allegations in the plaint in regard to the said correspondence. On this aspect of the case, to some extent, there is unanimity between Mody J., and the learned Judges of the Division Bench of the Bombay High Court. Adverting to para 7 of the written statement, Mody, J., says "In my opinion, paragraph 7 of the written statement does not at all, directly or indirectly, specifically or by implication, deal with any of the said three statements of facts. A denial of a contract is not a denial of the receipt or of the contents of the said letter dated 7th September 1948 or the writing of the letter dated 13th September 1948. The defendants can conceivably admit the said three statements of fact but still deny that any contract resulted thereby. Therefore the said three statements of facts must be deemed to have been admitted." Dealing with para 8 of the written statement, the learned judge says that these two statements of facts have not been pleaded to in the written statement and must, therefore, be deemed to have been admitted. But having gone so far, the learned Judge rules against their admissibility on the ground that there are no allegations that the defendants wrote the letters attributed to them and that there is no description of the contents of the letters. This, if I may say so, is rather hypercritical. The allegations in para 2 of the plaint in express terms say that the letters emanated from the defendants and also give their gist. The Division Bench of the High Court in the context of the said denials said:
"Therefore, there is no denial of this correspondence. Indeed there could not be, because before the Written Statement was filed inspection was given by the plaintiffs of this correspondence and again the conscientious draftsman of the written statement could not possibly have controverted the statement that these letters passed between the parties.
Therefore, in our opinion, these two letters of the 7th September, 1948 and 13th September, 1948 are admissible in evidence.
41 and we will formally admit them in evidence." Then they proceeded to state :
"Now, we read this denial to mean not a denial of the exchange of letters and telegrams, not a denial of the correctness of the copies of the documents of which the Defendants have taken inspection, but a submission in law that no contract emerges from the exchange of these letters and telegrams.
For the reasons already given by me, I entirely agree with the view expressed by the Division Bench on the interpretation of the pleadings and hold that the said letters have been rightly admitted in evidence. If the said letters can go in as evidence, the first condition, namely, the factum of submission has been proved in this case.
As regards the question whether the arbitration was conducted in accordance with the submission, the pleadings again afford the answer. In paras 3, 4 and 5 of the plaint it is specifically stated that the parties agreed to the arbitration clause and to the procedure prescribed for carrying out the arbitration. It is stated therein that pursuant to r. 5 and clauses B, C and E of r. 15 of the Rules of the said American Spice Trade Association, arbitrators and umpire were appointed, that the arbitrators and the umpire subscribed to their oaths of office and proceeded to hear the matter on 27th June, 1949, and 12th July, 1949, that the defendants, though duly notified of the hearings, did not attend the same, that on 12th July, 1949, the said arbitrators and umpire duly made, signed, acknowledged and published their awards and thereby they unanimously held that the defendants had committed a breach of the said two contracts and awarded that the defendants should pay to the plaintiffs specific amounts in respect of the said contracts as and by way of damages. Paragraph 7 of the plaint describes how the defendants did not meet the demand, how proceedings were taken before the Supreme Court of the State of New York, how notice of the said proceedings was duly served on the defendants and how the said Court pronounced its judgment confirming the said awards.
Paragraphs 9, 10, 11 and 12 of the written statement deal with the said allegations. In the said paragraphs the defendants do not deny the factum of the appointment of arbitrators and the procedure followed by 4-2 S C India/64 42 them in making the awards. They are content to say that they are not bound by or concerned with the appointment of the arbitrators by the plaintiffs as alleged therein or other-wise, that they are not bound by or concerned with any of the statements contained in para 7 of the plaint and that the awards passed by the arbitrators and the umpire are not binding on them. As regards the allegations in para 7 they only say that the arbitrators acted without jurisdiction and that the judgment of the Supreme Court of the State of New York made thereon is not binding on them. It will be seen from the said denials that neither the appointment of the arbitrators nor the steps taken by them are denied. If so it must be held, on the same reasoning which I have adopted in the context of the allegations pertaining to submission, that in the absence of specific denials it must be held that it is admitted that the awards were made in strict compliance with the terms of submission.
Now coming to the third condition, namely, the proof of the fact that the awards are valid according to the law of the country where they were made, the same equivocal attitude is adopted by the defendants in their written statement. In para 8 of the plaint there is the following specific allegation in that regard :
"........ the said arbitration having been duly held and the said awards having been duly made, signed, acknowledged and published according to the said rules and the laws of the State of New York, and the defendants not having taken steps to have the said awards or either of them set aside or modified., as provided in the said rules and by the laws of the State of New York, the said awards are binding on the defendants and the defendants are now precluded and estopped from disputing the same." Here there is a definite averment that the awards were made according to the laws of the State of New York. In the written statement of the defendants, though they generally deny that the awards are binding on them, there is no specific denial that the awards are not in accordance with the laws of the State of New York. Applying the same rules of construction which I invoked in the case of the other averments in the plaint, I must also hold that the 43 defendants must be held to have admitted the fact that the awards were made in accordance with the laws of the State of New York.
There is one important circumstance which must be borne in mind in construing the terms of the written statement. It is not disputed that the plaintiffs have filed affidavits disclosing the copies of the documents mentioned in the plaint. The defendants' Advocate bad inspection of the said documents before he filed his written statement. It is not disputed that the defendants received a copy of the petition filed by the plaintiffs in the Supreme Court of the State of New York, along with a copy of the awards and the order of the Court to show cause. With the knowledge of the contents of the copies of the letters and the contents of the awards, the Advocate for the defendants rightly and properly was not in a position to deny the factual aspect of the passing of the letters and the making of the awards and the delivery of the judgment by the Supreme Court of the State of New York confirming the said awards. That is why the written statement contained vague and general denials only specifically raising disputes on legal questions, and designedly giving equivocal answers to factual aspects. It is said that no inference of tacit acceptance on the part of the defendants or their counsel can be drawn, for the defendants' Advocate, after inspection of the documents, asked the plaintiffs' Advocate to produce the originals, but the plaintiffs failed and neglected to do so. But this circumstance does not detract from the knowledge of the defendants and their Advocate of the existence of the said documents and their contents before the written statement was drafted. This circumstance gives a satisfactory explanation for the vagueness of the allegations in the written statement of the defendants. They were designedly made vague as the Advocate presumably could not bring himself to go the whole length of denying the facts. I, therefore, hold, on a fair and reasonable construction of the pleadings and written statement that the existence of the three conditions for enforcing the awards have been admitted by the defendants in their pleadings and that, therefore, they need not be independently proved.
I would go further and hold that the said three conditions are also proved by Ex. X-9, The said exhibit is the record of proceeding of the Supreme Court of the State of New York relating to the arbitration between the plaintiffs and the respondents. That record contains the certificate issued by the Counsel General and other papers relating to the proceedings including the order and judgment of the said Supreme Court. The Certificate reads thus :
"THIS IS TO CERTIFY (a) that the annexed proceedings have been duly had in accordance with the laws of the State of New York.
(b) that the annexed proceedings are duly certified by the officer having the legal custody of the originals thereof at the time such annexed proceedings were issued by the Supreme Court of New York.
(c) that the several persons named in the annexed proceedings as holding the respective offices stated therein in respect of each of them did in fact bold such respective office at the time the same took place.
The Consulate-General of India assumes no responsibility for the contents of this document.
Dated: New York, N.Y.
June 18th, 1957.
Sd./M. Gopalcharan CONSUL-GENERAL Seal of CONSULATE GENERAL OF INDIA, New York, N.Y.
The order and judgment of the Supreme Court of New York dated March 21, 1950, give in detail the filing of the application by the -respondents for an order confirming the two awards ; the consideration given to the said application by the Court ; the Court's satisfaction, after perusing the awards and the connected papers, that the said proceedings were in all respects regular; and the terms of the order made on the said application. The decretal portion of the order confirms the awards. The judgment is signed by Archibald R. Watgon, Clerk, and certified both by the clerk and the Clerk of the Supreme court of New York County. If the judgment goes into evidence, the, three conditions are satisfied, namely, that there was 45 a submission, that the arbitrators gave the awards in terms of the submission and that a judgment was made on those awards on the ground that the awards were made in accordance with law.
But it is argued by the learned Solicitor-General that the said judgment has not been proved in the manner prescribed by the Indian Evidence Act. The relevant sections of the Evidence Act may now be read :
Section 74 : The following documents are public documents :(1) documents forming the acts, or records of acts(iii)of public officers, legislative, judicial and executive of any part of India or of the Commonwealth or of a foreign country.
Section 78: The following public documents may be proved as follows (6) Public documents of any other class in a foreign country, By the original, or by a copy certified by the legal keeper, thereof with a certificate under the seal of a notary public, or of an Indian Consul or diplomatic agent, that the copy is duly certified by the officer having the legal custody of the original, and upon proof of the character of the document according to the law of the foreign country." Section 86 : The Court may presume that any document purporting to be a certified copy of any judicial record of any country not forming part of India or of Her Majesty's Dominions is genuine and accurate, if the document purports to be certified in any manner Which is certified by any representative of the Central Government in or for such country to be the manner commonly in use in that country for the certification of copies of judicial records..............." It is not disputed that the copy of the Judgment is certified by the legal keeper of the original within the meaning of s. 78(6) of the Evidence Act; nor is it contended that there is no certificate under the seal of an Indian Consul certifying that the copy is certified by the officer having 46 the legal custody of the original. But what is contended is that under s. 78(6) of the Evidence Act three conditions must be complied with before the judgment can be admitted in evidence and the third condition, namely, proof of character of the document according to the law of the foreign country, is not forthcoming in this case. A perusal of s. 78(6) of the Evidence Act makes it clear that apart from the two certificates-one by the legal keeper of the original documents and the other by the Consul-General there shall also be proof of the character of the document according to the law of the foreign country before the document is admitted. It is a condition precedent. The short question, therefore, is whether there is such proof in this case.
Proof can be by direct or circumstantial evidence. Proof can also be given by placing before the Court facts giving rise to presumptions, rebuttable or irrebuttable. Section 86 of the Evidence Act lays down that a Court may presume the genuineness and accuracy of any document purporting to be a certified copy of any judicial record of any foreign country, if such a copy is duly certified in the manner and according to the rules in use in the country for certification of copies of judicial records. To give rise to this presumption it is not necessary that the judgment of the foreign country should have already been admitted in evidence. While s. 78(6) of the Evidence Act lays down three conditions for admitting the judgment in evidence, the admission of the judicial record is not a condition precedent for drawing the requisite presumption under s. 86 of the Evidence Act. That presumption may be drawn before the said record is admitted. The document may be looked into for the purpose of ascertaining whether there is the requisite certificate, viz., a certificate issued by any representative of the Central Government in the concerned country to the effect that the said document was certified in the manner commonly in use in that country for the certification of copies of judicial record. If the distinction between the certificate and the judgment is borne in mind, the fallacy of the argument becomes apparent.
The requisite certificate makes the document admissible and not viace versa. If there was such a certificate forthcoming-in this case there is such a certificate-the document may be presumed to be genuine and accurate. If it is presumed 47 to be genuine and accurate, it shows its character, viz., that it is a genuine judgment made by the Supreme Court of New York. This is a fit case for raising the said presumption and with the aid of this presumption the third condition is also complied with i.e., it is a judgment of the Supreme Court of the State of New York made in accordance with law. As the three conditions laid down in S. 78(6) of the Evidence Act are fulfilled, the document can legitimately be admitted in evidence, and if it is admitted, the document, by its own force, establishes that the aforesaid three conditions for the enforceability of the awards have been fulfilled.
Now I come to the second contention. This deals with the jurisdiction of the Bombay High Court on its original side to entertain the suit. Clause 12 of the Letters Patent for Bombay enables a party to file a suit with the leave of the Court, if the cause of action arises in part within the local limits of the ordinary original Jurisdiction of the said High Court. The cause of action in the plaint is given as follows :
"........ the terms of business were accepted by the defendants in Bombay and the proposal or acceptance of the said contracts by the defendants took place in Bombay. The defendants' refusal to pay the said sum also took place in Bombay." On those allegations the leave of the
