Notice of Motion No.2382 of 2003,Suit No.2488 of 2003

2nd February, 2006

Petitioner Counsel: Mr. D. D. MADAN,Mr. P. S. COLABAWALLA,Kanga and Co.
Respondent Counsel: Mr. JANAK DWARKADAS,Mr. N. ENGINEER,R. M. G. Law

Cases Cited:
Uttam Singh Duggal & Co. Ltd. Vs. United Bank of India, (2000)7 SCC 120 [Para 5,19]
International Woollen Mills Vs. Standard Wool (U.K.) Ltd., (2001)5 SCC 265 [Para 9,15]
Islamic Investment Company for the Gulf (Bahamas) Ltd. Vs. Symphony Gems N. V. and Vijay K. Mehta, (2005)2 Mh.L.J. 1077 [Para 9,15]
Gudemetla China Apalaraju Vs. Kota Venkata Subba Rao, AIR 1946(3) Madras 296 [Para 10,13,16]
Muhammad Moideen Vs. S.K.R.S.K.R. Chinthamani Chettiar, AIR 1929 Madras 469 [Para 13,15,16]
Mohammed Abdulla Vs.P. M. Abdul Rahim, AIR 1985 Mad. 379 [Para 13,15,16]

JUDGMENT

JUDGMENT :- The present notice of motion has been taken out for a decree on admission for the sum of US $ 17,919,603.68 with interest @ 9% p.a. from the date of filing the suit till payment and/or realisation. Some of the material facts of the present case briefly enumerated are as under :

2. The plaintiffs have filed a suit for the recovery of aforesaid amount based on foreign Judgment and decree dt.18-9-02 passed by the United States District Court, Southern District of New York in case No.02 CV 4007 (LLS). The plaintiffs are a bank and are interalia constituted and having their operations in New York, U.S.A. The defendant no.1 is a company which is incorporated in India and carrying on business at Bombay. Defendant no.2 is a Chairman of defendant no.1. There is a company known as Silver Line Technologies, Inc, a company incorporated and constituted under the laws of Delaware, U.S.A. The said company Silver Line Technologies Inc was indebted to the plaintiffs for a large amount of money and defendant no.1 and 2 herein were the personal guarantors in respect of the loan lent and advanced by the plaintiff bank to the said Silver Line Technologies, Inc. Plaintiffs initiated legal recovery proceedings in the Court of United States District Court, Southern District of New York by filing a suit being case No.02 CV 4007 (LLS) against the said Silver Line Technologies, Inc. The defendant no.1 and 2 herein were also parties to the said suit as guarantors. In the said suit proceedings, defendants entered their appearances and after entering their appearances, settlement was arrived at by and between the parties and the same was reduced to writing. The said settlement agreement is dt.18-9-02. Under the terms and conditions of the said settlement agreement, all the defendants in the said suit in America including the defendants herein unconditionally confirmed, acknowledged and admitted their liability to pay to the plaintiffs certain amounts as mentioned in the said settlement agreement. Defendant No.1 and 2 herein as personal guarantors also admitted and acknowledged liability to pay the said aforesaid amount of loan. Thus, the said action which was initiated by the plaintiffs in America was culminated in a settlement agreement between the parties. The said settlement agreement which was filed in court, thus can be termed as Consent Terms by which disputes between the parties were finally resolved. In the light of the said settlement agreement which was entered into by and between the parties and after considering the pleadings, documents and evidence on merits and also the admission of liability contained in the said settlement agreement, the court of United States District Court passed a Judgment and Decree in favour of plaintiffs and against defendants for principal sum of US$ 27,143,144.24 and Attorney's fees at the rate of US$ 351,772.85, aggregating to US$ 27,495,164.09 as the decree against the defendants and in favour of the plaintiffs. In respect of the said decree in fact the plaintiffs also received part payment of US$ 9,575,560.41 and thus, the balance amount claimed by the plaintiffs in the present suit is US$ 17,919,603.68.

3. In view of the fact that the United States being not a reciprocal territory as contemplated under section 44-A of the Civil Procedure Code, plaintiffs herein has filed a suit on the basis of the said judgment as the said Judgment is foreign Judgment under section 13 of the Civil Procedure Code. Plaintiffs have accordingly filed the present suit against the defendant no.1 and 2 who are the two guarantors and parties to the said proceedings in America and have suffered Judgment decree against them. In this suit, the present Notice of Motion has been taken out for the purpose of passing a decree in terms of the settlement agreement which has been arrived at by and between the parties and forming part of the United States Suit No.02 CV 4007 and on the basis of which the District Court, Southern District of New York in United States has passed a Judgment and Decree.

4. The learned counsel for the plaintiffs has contended that there is an unequivocal admission of liability by the defendant no.1 and 2 by virtue of the settlement agreement arrived at by and between the parties. The said settlement agreement annexed at Ex.A is dt.18-9-02. The said settlement agreement interalia provided that the same is filed to bring the settlement of the action initiated by the plaintiff bank. Under the said settlement agreement it was provided that the Silver Line Technologies, Inc. will settle the outstanding loan of plaintiffs bank for cash purchase price of US$ 14,500,000 on or before 7-10-02 which will be treated as closing date.

5. It is further provided that in an event if the defendant fail to comply with the terms and conditions of the agreement, the judgment in a format which was annexed to the said agreement will be entered by the District Judge, New York and decree will be accordingly passed. It is not in dispute before me, that there was non-compliance with the terms of settlement agreement and accordingly on 18-9-02 the learned District Judge has entered the Judgment which has been the subject matter of the present suit. Mr. Madan, the learned counsel for the plaintiffs, contended that in the light of the fact that there is an unequivocal admission in the said settlement agreement which has been entered into between the parties, this court must accept the same as admission of liability and pass necessary decree in respect thereof. He has further contended that under the provisions of Order 12 Rule 6 of the Civil Procedure Code, Judgment can be entered on admission irrespective of the fact that admissions have been made in the course of proceedings or in the collateral proceedings or in the collateral documents. He has relied upon the Judgment of the Apex Court in the case of Uttam Singh Duggal & Co. Ltd. Vs. United Bank of India and Ors. reported in (2000)7 Supreme Court Cases 120 particularly para 2, 12 and 13 of the said judgment which reads as under :

"2. The application filed by the 1st respondent Bank for judgment on admission covers only a part of the suit claim. The 1st respondent bank relied upon (i) balance-sheet of the petitioner for the year ending 31-3-1989 with reference to Schedule 'C', 'D' and 'E'; (ii) minutes of the meeting of the Board of Directors held on 30-5-1990 which noticed the discussion at the meeting and issues that could be deemed to have been settled as a result thereof; and (iii) letter dated 4-6-1990 communicating the resolution and minutes of the meeting of the Board of Directors held on 30-5-1990.

12. As to the object of Order 12 Rule 6, we need not say anything more than what the legislature itself has said when the provision came to the amended. In the objects and Reasons set out while amending the said Rule, it is stated that "where a claim is admitted, the court has jurisdiction to enter a judgment for the plaintiff and to pass a decree on admitted claim. The object of the Rule is to enable the party to obtain a speedy judgment at least to the extent of the relief to which according to the admission of the defendant, the plaintiff is entitled". We should not unduly narrow down the meaning of this Rule as the object is to enable a party to obtain speedy judgment. Where the other party has made a plain admission entitling the former to succeed, it should apply and also wherever there is a clear admission of facts in the face of which it is impossible for the party making such admission to succeed.

13. The next contention canvassed is that the resolutions or minutes of the meeting of the Board of Directors, resolution passed thereof and the letter sending the said resolution to the respondent Bank cannot amount to pleading or come within the scope of the Rule as such statements are not made in the course of the pleadings or otherwise. When a statement is made to a party and such statement is brought before the court showing admission of liability by an application filed under Order 12, Rule 6 and the other side has sufficient opportunity to explain the said admission and if such explanation is not accepted by the court, we do not think the trial court is helpless in refusing to pass a decree. We have adverted to the basis of the claim and the manner on which the trial court has dealt with the same. When the trial Judge states that the statement made in the proceedings of the Board of Directors' meeting and the letter sent as well as the pleadings when read together, leads to unambiguous and clear admission with only the extent to which the admission is made in dispute, and the court had a duty to decide the same and grant a decree, we think this approach is unexceptionable."

6. According to him, the said judgment covers the issue in the present case in as much as Supreme Court in the aforesaid Judgment has held that the admission in the balance-sheet of the company would be sufficient to pass a decree on admission. It has been further held in the said judgment that the provisions of Order 12, Rule 6 of the Civil Procedure Code should be liberally construed so as to provide for a speedy justice and should not be interpreted in a manner to defeat the intention of the legislature. The learned counsel for the plaintiffs thus, submitted that this court should pass a decree on the basis of settlement which has been arrived at between the parties and there is an unequivocal admission of liability therein and thus, this court is empowered to pass a decree in the present suit and motion should be made absolute.

7. On the other hand Mr. Dwarkadas, the learned counsel for the defendants has placed before me two contentions. Firstly, it has been contended that the settlement which has been arrived at between the parties in foreign suit and proceedings has culminated in a foreign decree and that the present suit is filed on the basis of such a foreign decree and defaulted judgment. It is not filed on the basis of such admission of liability or a settlement agreement entered into between the parties. In his admission he states that once a suit itself is not filed on a settlement agreement or admission of liability then in that event it is not permissible for the court to consider the said settlement agreement dehors the decree and judgment by the foreign court and pass a decree. It has been alternatively contended that even on merits the said foreign judgment being not enforceable in law as it is not given on merits, this court cannot decree such a suit based on such a foreign judgment. It has been thus contended that the plaintiffs have realised that the suit is likely to fail because it has been filed on a foreign decree which cannot be enforced in India and thus, has taken out present motion for a decree on admission on the basis of settlement agreement which is not forming part of the suit itself. It has been thus contended that the said foreign judgment being not a foreign judgment as contemplated under section 13 of the Civil Procedure Code the same is not enforceable in India because it is not delivered on merits and therefore the present suit is liable to be dismissed. It has been thus, contended that if suit is liable to be dismissed then by way of interim application under Order 12, Rule 6 of the Civil Procedure Code, plaintiffs cannot claim decree in the present suit.

8. In support of the aforesaid contention my attention has been drawn by the learned counsel for the defendants to the provisions of section 13 of the Civil Procedure Code which reads as under :

"13. When foreign judgment not conclusive - A foreign judgment shall be conclusive as to any matter thereby adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title except -

(a) Where it has not been pronounced by a Court of competent jurisdiction;

(b) Where it has not been given on the merits of the case;

(c) Where it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable;

(d) Where the proceedings in which the judgment was obtained are opposed to natural justice;

(e) Where it has been obtained by fraud;

(f) Where it sustains a claim founded on a breach of any law in force in India."

9. It has been contended by the learned counsel for the plaintiffs that under section 13(b) where judgment is not delivered on merits of the case then the said judgment is not enforceable in this country and therefore in fact the suit itself must fail. In support of the aforesaid contention the learned counsel for the defendants has contended that admittedly judgment is a default judgment. It has been contented that under settlement agreement the said Silverline Technologies Ltd. was required to carry out certain acts on or before the closing date and on failure to do so judgment will be been entered by the District Judge, Southern District of New York in United States. It has been thus contended that such default judgment is not a judgment on merits and therefore this court must refuse to grant any relief in the present application because the suit itself is not maintainable. On the basis of such foreign judgment he submitted that no decree can be passed. In support of the aforesaid contention, the learned counsel for defendants has drawn my attention to the judgment of the Apex Court in the case of International Woollen Mills Vs. Standard Wool (U.K.) Ltd. reported in (2001)5 SCC 265. He has also drawn my attention to my own judgment in the case of Islamic Investment Company for the Gulf (Bahamas) Ltd. Vs. Symphony Gems N. V. and others and Vijay K. Mehta reported in (2005)2 Mh.L.J. 1077 and it has been contended that in the light of the judgment of the apex court in the case of International Woollen Mills Vs. Standard Wool (UK) Ltd. (Supra) this court cannot pass a decree in respect of judgment which is entered without going into the trial and leading evidence between the parties. It has been contended that a default judgment is not judgment on merits. Even if it is by consent of the parties and thus, this court cannot enforce such a judgment. He has brought to my notice my own judgment in the case of Islamic Investment Company (Supra) which has been referred to the Division Bench by me in respect of an issue i.e. whether a summary judgment is one on merits and thus enforceable or not? It has been contended in the light of the aforesaid position in law this court should not pass any decree and notice of motion should be dismissed.

10. The learned counsel for the defendants has alternatively contended that even assuming that judgment which has been delivered by United States District Court, Southern District of New York in the aforesaid proceeding is a judgment based on consent terms and/or consent agreement between the parties still such a judgment is not enforceable in law under section 13(b) of the Civil Procedure Code because the consent decree or consent judgment is not a judgment on merits between the parties. He has relied upon the judgment of Madras High Court in the case of Gudemetla China Apalaraju Vs. Kota Venkata Subba Rao reported in AIR 1946(3) Madras 296 particularly the following para.

"From this observation and the language of S.13 it would appear that for a decree of a foreign Court to be conclusive there should be a controversy and an adjudication thereon. In 52 Mad. 503 the defendants had appeared and filed a written statement and an issue had been raised with regard to the plea taken by him. But when the case came on for trial, the defendants and plaintiffs filed a joint petition to the effect that the case be postponed for three months with a view to settlement and that if it was not settled, judgment be entered for plaintiffs as prayed for with costs. After the period of three months expired the suit was called. The defendants were absent and the foreign Court ordered that the suit be decreed in terms of the order passed on the joint petition already referred to. It was held that S.13(b) did not apply. There is nothing in this decision to indicate that for the application S.13 controversy is not necessary. On the other hand, the above mentioned decision of the Privy Council as well as other decisions holding that decrees of the foreign Court passed ex parte were not conclusive were distinguished by the learned Judges on the ground that in the case before them, there was a controversy. But in the present case there was no controversy. What happened in this case was that both the petitioner and the respondent went to the Yanam Court with a drafted compromise and the decree in question was passed on the strength of that compromise. Therefore, when they went to that Court, they had no dispute and there was nothing for the Court to decide. The decree appears to have been given mechanically in accordance with the prescribed rule. It was in effect a mere recognition by a Court of an arrangement already arrived at between the parties. In these circumstances it cannot be said that the decree of the Yanam Court was a decision on the merits. The petition is therefore, dismissed with costs."

11. He has also relied upon the judgment of D. T. Keymer Vs. P. Visvanatham Reddi reported in AIR 1916 Privy Council (sic) particularly following para:

"The whole question in the present appeal is whether, in the circumstances narrated judgment was given on the 5th May, 1913, between the parties on the merits of the case. Now if the merits of the case are examined, there would appear to be, first, a denial that there was a partnership between the defendant and the firm with whom the plaintiff had entered into the arrangement; secondly, a denial that the arrangement had been made; and, thirdly, a more general denial, that even if the arrangement had been made the circumstances upon which the plaintiff alleged that his right to the money arose had never transpired. No single one of these matters was even considered or was ever the subject of adjudication at all. In point of fact what happened was that, because the defendant refused to answer the interrogatories which had been submitted to him the merits of the case were never investigated and his defence was struck out. He was treated as though he had not defended, and judgment was given upon that footing. It appears to their Lordships that no such decision as that can be regarded as a decision given on the merits of the case within the meaning of section 13, sub-section (b). It is quite plain that sub-section must refer to some general class, and Sir Robert Finlay was asked to explain to what class of case in his view it did refer. In answer he pointed out to their Lordships that it would refer to a case where judgment had been given upon the question of the Statutes of Limitation, and he may be well founded in that view. But there must be other matters to which the sub-section refers, and in their Lordships view it refers to those cases where, for one reason or another, the controversy raised in the action has not, in fact, been the subject of direct adjudication by the Court."

12. It has been contended that thus, in the light of the aforesaid judgment even if the settlement has been arrived at between the parties on consent and judgment is entered by the court on the basis of consent terms still such a judgment is not on merits and is not enforceable in law under section 13(b) of the Civil Procedure Code.

13. The learned counsel for the plaintiffs has on the other hand relied upon the two judgments of Madras High Court interalia taking a view that decree passed on consent terms would not hit by the provisions of section 13(b) of the CPC. He has relied upon the judgment of the Madras High Court in the case of Muhammad Moideen and others Vs. S.K.R.S.K.R. Chinthamani Chettiar and others reported in AIR 1929 Madras 469 and another Judgment of Learned single Judge of Madras High Court in the case of Mohammed Abdulla Vs. P. M. Abdul Rahim reported in AIR 1985 Madras 379. He has further contended that the judgment of the Madras High Court in the case of Gudemetla China Appalaraju Vs. Kota Venkata Subba Rao (Supra) has been rightly distinguished by the learned single judge by holding that was a case which was decided on the peculiar facts of that case and cannot be regarded as a general proposition of law that judgment on the basis of consent terms is not a judgment on merits. It was pointed out that in the said case even before the court proceeding would be initiated, parties had entered into draft compromise and decree in question was passed on the basis of that compromise. In that view of the matter, judgment of Madras High Court in the case of Gudemetla China Appalaraju Vs. Kota Venkata Subba Rao (Supra) cannot be applied in the present case.

14. After considering the rival controversies in the present case, in my opinion, the issue which arises is whether consent decree or consent agreement based on consent of the parties could mean that a judgment passed thereof is not on merits and therefore not enforceable u.s.13(b) of the CPC. In the present case, there is no dispute that there has been a settlement arrived at between the parties and a draft order was duly signed by the parties and tendered in the court. The court before delivering the judgment has recorded in the Judgment that the court has considered evidence, documents and the matter on merits and thereafter in the light of the consent of the parties have accepted the settlement which has been arrived at by and between the parties and has entered into the judgment and decree on the basis of said settlement. In my opinion, such a consent order or consent decree by itself prevents the court from going into detail merits of the case and a party who by its own conduct of giving the consent invites the court for entering upon a order and judgment is precluded from raising the defence that the judgment is not on merits and therefore not enforceable under S.13(b) of this Act. In any court or legal proceedings it is always open for the parties to submit to the decree or settle the dispute between the parties. Such decree and such settlement which has been arrived at between the parties are normally enforceable in law even in context of the foreign judgment and provisions of S.13 of the CPC. I am of the opinion that the consent order or consent decree cannot be refused to be enforced by virtue of the contention that provisions of S.13-b interalia requires judgment and decree should be on merits.

15. In my opinion, a party who gives his consent to enter into a particular judgment is estopped thereafter from contending that such judgment and or decree is not on merits and therefore not enforceable in law in this country by virtue of S.13-b of the CPC. While considering the judgment of the Apex Court in the case of International Woollen Mills Vs. Standard Wool (U.K.) Ltd. (Supra) I have no doubt held that judgment on merits means consideration of the case on merits after leading evidence between the parties but that was not a case where a party himself gave his consent to enter a judgment or decree. The court in the aforesaid case of International Woollen Mills (Supra) was not considering the fact that whether consent order or consent decree would tantamount to judgment on merits and thus, enforceable in law or not. I am of the opinion the views of the Division Bench and Single Judge of the Madras High Court in the case of Muhammad Moideen and Ors. (Supra) and in case of Mohammed Abdulla (Supra) directly governs the case. Both the aforesaid judgments were the cases where decrees were obtained by consent terms and consent decree was filed and thereafter contention was raised that such decree is not enforceable in the light of the provisions of S.13-b of the CPC. Reliance placed on the Judgment of Islamic Investment Company for the Gulf (Bahamas) Ltd. (Supra) which is delivered by me was a case in which a decree was passed not on merits but was passed in a summary jurisdiction of the court. A decree in summary jurisdiction cannot be treated as a decree on merits because there was no trial. However, in a case where party themselves invited the court to pass judgment and order by giving their consent and/or arrived at settlement between the parties, in my opinion is precluded from rasing contention that the said judgment and or decree is not in terms of the provision of S.13-b of the CPC and thus, cannot be enforced in the Indian Court.

16. I am also in total agreement with the view expressed by the Madras High Court in the aforesaid two judgments of Muhammad Moideen and Ors. (Supra) and Mohammad Abdulla (Supra). In my opinion, the Judgment of Madras High Court of the learned single Judge in the case of Gudemetla China Appalaraju (Supra) has been rightly distinguished by the subsequent judgments of the same court in the case of Mohammad Abdulla (Supra). In the case of Gudemetla China Appalaraju (Supra) even before suit was filed, both the parties had entered into a settlement and they went to the court with a draft compromise and thus, it was contended therein that the court even before passing the consent terms and/or decree did not apply its mind to see that such consent terms or decree should be passed or not.

17. In the present case, it is on record and the judgment itself resides that the court has applied the mind and has considered the evidence, documents and thereafter passed a decree. The said judgment reads as under :

"Whereas, based upon all pleadings, motion papers and evidence introduced at trial in this action."

18. Thus, in my opinion, the said judgment of the Madras High Court is based on totally peculiar facts of that case and thus, cannot be applied to the facts of the present case. In so far as Privy Council judgment is concerned, that judgment was a default judgment by virtue of defendants failing to answer the interrogatories which was administered to him and thus a default judgment was entered into and therefore it was rightly held that said judgment was not on merits u.s.13-b of the CPC. In my opinion, in the present case, it is not possible to accept the contention of the learned counsel for the defendants that suit is liable to be dismissed on the ground that the judgment and/or decree which has been delivered by the foreign court namely United States District Court, Southern District of New York is not a valid foreign judgment u.s.13-b of the CPC. The aforesaid argument is thus liable to be rejected. Accordingly I reject the said contention of the learned counsel for defendants.

19. This leads me to the next ancillary issue which has been argued by the learned counsel for the defendants that suit is based on enforcement of Judgment and decree and not based on settlement agreement arrived at between the parties. It has been contended that the settlement agreement being merged in the judgment and decree of the foreign court no decree can be passed by this court in the present Notice of Motion. In so far as aforesaid contention is concerned, I find no substance in the present case as held by the Apex Court in the case of Uttam Singh Duggal & Co. Ltd. (Supra) that the court is empowered under Order 12, Rule 6 of the CPC to pass a decree on the basis of any admission including the documents which are not forming part of the proceedings. In the present case, settlement agreement is very much a part of the present proceeding. In para 5 of the said plaint, the said agreement has been specifically pleaded and the said settlement agreement is annexed at Ex.A to the plaint. In my opinion, merely because relief sought is for decree in terms of judgment already entered into by the American Court it cannot be stated that this court is not empowered to pass a decree on the basis of admission contained in the said settlement agreement which is forming part of the suit proceeding.

20. I am of the opinion that there is a clear cut unequivocal, unambiguous admission of liability on the part of defendant no.1 and 2 as recorded in writing and therefore, plaintiffs are entitled to decree and judgment under Order 12, Rule 6 of the CPC for decree on admission. Accordingly, I make the present notice of motion absolute and decree the suit for the sum of US 17,919,603.68 with interest thereon @ 9% p.a. from the date of the suit till payment and/or realisation. The Notice of Motion and Suit both are disposed of accordingly. No order as to costs.

Notice of motion allowed.