Appeal (Lodging) No.246 of 2014,Summons for Judgment No.10 of 2013,Summary Suit No.2066 of 2012

28th August, 2014.

Petitioner Counsel: Mr. PRAVIN SAMDANI, Mr. PRADEEP BAKHRU, WADIA GHANDY
Respondent Counsel: Mr. KEDAR WAGLE

Cases Cited:
Malaysian International Vs. Mega Safe Deposit Vaults Pvt. Ltd., 2006(3) Bom.C.R. 109 [Para 11]
State of Bombay Vs. Chhaganlal Gangaram Lavar, AIR 1955 Bom.1 [Para 12]
Pandurang Kalu Patil Vs. State of Maharashtra, 2002 ALL MR (Cri) 1205 (S.C.)=(2002) 2 SCC 490 [Para 12]
Dynamit Actien-Gesellschaft Vormals Al-fred Nobel & Co. Vs. Rio Tinto Co. Ltd., 1918 A.C. 292 [Para 12]

JUDGMENT

S. J. VAZIFDAR, J. :- Admit. With the consent of the parties, the appeal is taken up for final hearing.

2. This is an appeal against the order of the learned single Judge granting the appellant (original defendant) leave to defend the suit filed by the respondent subject to its depositing the rupee equivalent to Euros 11,37,866.30 at the rate as may be applicable on the date of such deposit within eight weeks.

3. The respondent raised indents upon the appellant for supply of certain goods on the terms and conditions contained therein. The same were accepted by the appellant. The documents were to be sent through the respondent's bankers being Dresdner Bank AG to the appellant's bankers being Union Bank of India.

Pursuant thereto, the respondent manufactured and supplied the material. The documents were forwarded by the respondent through its bankers being Dresdner Bank AG to the appellant's bankers being Union Bank of India. The documents included the invoices.

4. There is no dispute that the respondent delivered the goods of the requisite quality and quantity to the appellant. The appellant admits receipt thereof upon negotiation of the documents including fifteen invoices. The appellant however paid only Euros 67,400 leaving the balance amount claimed in the suit. On merits therefore, there is little if anything to be said in favour of the appellant. Mr.Samdani, the learned senior counsel appearing on behalf of the appellant however, raised three defences.

5. Mr.Samdani submitted that the consequences of nondeposit of the amount as directed by the impugned order would be a decree for the entire amount as claimed. He submitted that under the invoices only 4% p.a. interest is payable, whereas the respondent has claimed interest at 12% p.a.

To leave no scope for grievance or doubt, we intend modifying the impugned order by providing that in the event of the appellant failing to deposit the amount as per the impugned order and this order, the consequences would be a decree for the principal amount with interest thereon at 4% p.a. from the date of invoices, and by granting the appellant unconditional leave for the balance interest. The appellant can have no further grievance in this regard.

6. Mr.Samdani then submitted that the appellant had issued promissory notes in favour of the respondent for the amounts mentioned in the invoices, that these promissory notes were endorsed by the respondent in favour of the Dresdner Bank and that there was no endorsement back to the respondent. He submitted that if Dresdner Bank also files a suit on the said invoices, it would result in the appellant being required to pay the amount twice over.

7. The defence is moon shine. It is common ground that the value of the invoices has not been paid by the appellant either to the respondent or to the Dresdner Bank. The Dresdner Bank has not even called upon the appellant to make payment in respect of the promissory notes. The promissory notes have in fact been deposited in Court. The promissory notes when submitted by Dresdner Bank through the Union Bank of India for collection were dishonoured by non-payment. The suit is based on the original cause of action viz. the invoices. The appellant is entitled to do so.

In fact a revised payment schedule was decided upon between the parties. The entire payments were to be made by August, 2010. Default interest at 4% p.a. was agreed upon. Even thereafter the balance consideration was not paid. This is not a case where the promissory notes were issued in extinguishment of the original cause of action. The promissory notes were only collateral security.

The suit is based on the invoices and a fax dated 11.11.2009, by which a revised payment schedule was decided upon.

8. In any event as we mentioned earlier, no claim has been made by the Dresdner Bank upon the appellant in respect of the said promissory notes. The promissory notes have in fact been deposited in Court. In the unlikely event of any such claim being made on the promissory notes, the Court can always pass appropriate orders on the amounts deposited, if any, pursuant to the impugned order. Further safeguards, if necessary, may also be provided by the trial Court at the hearing of the suit. This defence only establishes the appellant's intention not to make any payment whatsoever in respect of the goods sold and delivered to it by the respondent.

9. This brings us to Mr.Samdani's last contention. Mr.Samdani submitted that the invoices state that the contract and legal relationship between the parties shall be governed by the substantive laws of the Federal Republic of Germany. He submitted that the respondent had not proved German law and was therefore, not entitled to any reliefs.

10. Foreign law is a question of fact. There is a presumption that unless the contrary is proved, the general law of a foreign country is the same as Indian law and that the mere fact that the contract was entered into with reference to the law of another country will be immaterial.

11. Mr.Wagle, the learned counsel appearing on behalf of the respondent invited my attention to a judgment delivered by me in Malaysian International vs. Mega Safe Deposit Vaults Pvt. Ltd. 2006(3) Bom.C.R. 109, where I had dealt with this issue.

12. I have overcome my embarrassment in following my own judgment, as in that case I merely followed the judgment of the Privy Council in (Parchim) 1918 A.C. 157 and did not arrive at that finding in principle on my own. I held that the judgment of the Privy Council was binding on me. Indeed a judgment of the Privy Council is binding on any High Court, regardless of strength of the bench. This has been so held by a Full Bench of this Court in State of Bombay v. Chhaganlal Gangaram Lavar AIR 1955 Bom.1. The judgment was approved by the Supreme Court in Pandurang Kalu Patil v. State of Maharashtra (2002) 2 SCC 490 : [2002 ALL MR (Cri) 1205 (S.C.)]. I am therefore, equally bound by the judgment of the Privy Council while sitting on a Division Bench. It is sufficient to refer to paragraph 24 of the judgment, which reads as under :-

"In The Parchim [1918] AC 157, the Privy Council held, at page 161, as under :-

"No doubt the municipal law with reference to which the parties enter into the particular transaction is material in considering their intention as to the passing of the property; and if it appears that they contracted with reference to a municipal law other than English, and it be further proved that that municipal law is different in any material respect from the English law, this will of course be taken into account in determining their intention. But having regard to the presumption that unless the contrary be proved the general law of a foreign country is the same as the English law, the mere fact that the contract was entered into with reference to the law of another country will be immaterial. Having regard to the history of English mercantile law, the presumption referred to is itself quite reasonable."

The observations that follow do not either dilute or qualify the ratio in the sentence emphasised. They merely provide the rationale for the presumption. Nor do I read the ratio of this judgment as being confined to cases in England alone. Their Lordships continued thus :

"An investigation of the commercial codes of foreign countries would probably show that they differ from English commercial law rather in detail or in the inference to be drawn from particular facts than in substance or principle. For example, in countries where the civil law is more directly the basis of modern law than it is in this country, somewhat greater importance may be attached to risk as an indication of property. Or, again, the inference to be drawn from the possession of a bill of lading indorsed in blank may be somewhat stronger than it is in our law.

Their Lordships therefore are of opinion that in the present case the English municipal law, including the Sale of Goods Act, 1893, was rightly applied in determining the character of the cargo at the date of capture."

In the paragraphs that followed, I referred to the same principle summarized in Halsbury's Law of England, Vol. 8(3) and to the judgment of the House of Lords in Dynamit Actien-Gesellschaft Vormals Al-fred Nobel & Co. v. Rio Tinto Co. Ltd. (1918 A.C. 292), in which the judgment of the Privy Council was followed. As the judgment of the Privy Council is binding on this Court, it is not necessary to go any further.

13. Mr.Samdani did not contend that the judgment of the Privy Council is not applicable to the case. Nor did he contend that the judgment is not binding on us.

14. The appellant did not adduce any evidence of German law contrary to Indian law on the basis of which the appellant would have a defence to the claim in suit. In fact, it is not even alleged that German law on any point in issue is different from Indian law.

15. There is therefore, no defence whatsoever to the suit except to the limited extent of the rate of interest.

16. In the circumstances, the appeal ought to be disposed of by the following order :-

i)The impugned order is confirmed with a modification only to the extent that in the event of a decree being passed for nondeposit, interest shall be computed at 4% p.a. and not at 12% p.a., as prayed in the suit. In that event for the balance interest of 8% p.a., the appellant shall be entitled to unconditional leave to defend.

ii)The time to deposit the amount is extended upto and including 31.10.2014.

A.K. MENON, J.

I have read the judgment of my learned brother S.J. Vazifdar, J. I agree and have nothing further to add.

ORDER

i)The impugned order is confirmed with a modification only to the extent that in the event of a decree being passed for nondeposit, interest shall be computed at 4% p.a. and not at 12% p.a., as prayed in the suit. In that event for the balance interest of 8% p.a., the appellant shall be entitled to unconditional leave to defend.

ii)The time to deposit the amount is extended upto and including 31.10.2014.

Ordered accordingly.