TaxTMI 
TaxTMI 
1989 (12) TMI 271
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....ovember, 1984, 'as Madhusudan and Co. Ltd. was unable to discharge its liabilities to the plaintiff-bank, the plaintiff-bank filed a suit against Madhusudan and Co. The-brothers of the defendant were joined as party defendants on the basis of the guarantee executed by them. The defendant was not joined as a party to this suit and no amount was claimed from him. In December, 1984, the suit was decreed against Madhusudan and Co. Ltd. as well as the brothers of the defendant. On or about January 28, 1985, Madhusudan and Co. was ordered to be wound up. Thereafter, in July, 1985, the plaintiff-bank instituted a suit against the defendant on the basis of the guarantee said to have been executed in or around April 7, 1985, by the defendant, for about Rs. 2.05 crores. It is the case of the defendant that he was in no way concerned with Madhusudan and Co. Ltd. and had not given any guarantee to the plaintiff-bank in respect of the dues of Madhusudan and Co. Ltd. around April, 1975, or at any time. It is the contention of the defendant that, in 1971 and a few years thereafter, the defendant had resided in Hong Kong and had worked with his brothers. Madhusudan and Co. was then a proprietar....
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....ficate from a medical practitioner in Surat in support of this application. The certificate stated that the defendant was advise rest in bed for 12 weeks from December 16, 1986. On this application of the defendant, the Hong Kong Court adjourned the hearing of the suit to 16th and 17th March, 1987. On March 3, 1987, the defendant took out a summons for specific discovery. On March 6, 1987, the Hong Kong court refused the application for specific discovery. On March 16, 1987, the defendant's solicitors in Hong Kong made an application to the Hong Kong court to be allowed to cease to act for the defendant. This application was granted and the trial was adjourned to a date not before April 9, 1987. Ultimately, the court fixed the date of hearing as July 7, 1987. On this date, the defendant was absent and an ex parte decree was granted to the plaintiff-bank. It is this ex parte decree which is sought to be executed here. Under section 44A of the Code of Civil Procedure, where a certified copy of a decree of any of the superior courts of any reciprocating territory has been filed in a District Court, the decree may be executed in India as if it had been passed by the District Cour....
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....y engaged solicitors in the Hong Kong court and vigorously defended the action. It was a summary proceeding in which the defendant appeared through solicitors and obtained leave to defend. The defendant was granted unconditional leave to defend. As a result, the defendant also filed his defence. Documents Were also filed by both sides. After notice to both sides, the Hong Kong Supreme Court fixed a date for hearing of the suit. The defendant got the hearing of the suit adjourned on the production of a medical certificate. The defendant also tried to delay the hearing of the suit by making an application for specific discovery, which application was rejected. Thereafter, in March, 1987, after appearing for the defendant for two years, the defendant's solicitors in Hong Kong obtained a discharge. It is very relevant to note that, in March, 1987, on the date on which the defendant applied for specific discovery, the defendant also filed a suit in this High Court against the plaintiff-bank being Suit No. 645 of 1987 to restrain the plaintiff-bank from proceeding with the Hong Kong suit. On the very day on which an application was made on the defendant's behalf in the Hong Kong court fo....
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....n may be granted for releasing foreign exchange in U.S. dollars 40,00.0 initially for the purpose of defending the said suit which is a false suit. This amount is a rough estimate of the possible initial expenses for meeting the living and other expenses of two persons for three months in Hong Kong, fees of the advocates/solicitors who may be engaged at Hong Kong for defending the suit, court fee, etc., about which I am not in a position at this stage to give any definite break-up or documentary evidence." In his renewed application of November 7, 1987, the defendant has been at pains to point out to the Reserve Bank that even if a decree is passed against him, the plaintiff-bank will not be in a position to execute it in India since it would be illegal to execute the decree without the Reserve Bank's permission. The defendant, therefore, appears to be inviting rejection of his application. The learned single judge of this court also observed in his judgment of November 12, 1987. "In the reply, the defendants have pointed out that, in all probability, and I am inclined to agree with the defendants, that the plaintiff (defendant here) did not place all the facts before the Reserve B....
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.... reached hearing. In the meanwhile, the plaintiff-bank's suit before the Hong Kong court had been decreed. On the next day, the defendant quietly withdrew his application to the Reserve Bank for grant of foreign exchange. Looking to these circumstances, can it be said that the defendant has been prevented from defending the Hong Kong suit and that hence the decree which is passed is in violation of the principles of natural justice? In my view, there has been no violation of the principles of natural justice on the facts of the present case. In the first place, the defendant was granted unconditional leave to defend the Hong Kong suit. He had also taken all steps to defend the suit. But, for reasons best known to the defendant, he did not defend the suit when it reached hearing. His contention that, he could not defend the suit because he could not get release of foreign exchange from the Reserve Bank of India for the purpose of defending the suit also does not appear to be a valid grievance in the circumstances of the present case. From the facts set out above, it would, seem that the defendant did not take proper steps nor did he make any proper application for permission of t....
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.... be granted. In the present case, the suit was a summary suit. The defendant was granted unconditional leave to defend the suit. He filed his defence but, at the final hearing, he failed to appear. Hence an ex parte decree was pronounced in favour of the plaintiff-bank. The judgment states that "the defendant having failed to appear and upon proof of the plaintiff's claim," judgment is entered for the plaintiff. Can this be said to be a judgment on the merits of the case? In the case of D.T. Keymer v. P. Visvanathan Reddi, AIR 1916 PC 121, the defendant refused to answer interrogatories which had been submitted to him. Because of his refusal, the defence was struck out. The merits of the case were not investigated and the defendant was treated as though he had not defended the suit. Judgment was given upon that footing. The Privy Council held that such a decision cannot be regarded as a decision given on the merits of the case within the meaning of section 13(b) of the Code of Civil Procedure. The Privy Council observed that, in their Lordships' view, section 13(b) refers to those cases where, for one reason or another, the controversy raised in the action Hal not, in fact, been....
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....a decision on the merits even though passed ex parte, a decision passed without evidence of any kind but passed only on the plaintiff's pleadings cannot be held to be a decision on the merits. The Calcutta High Court has also come to a similar conclusion in the case of Derby Mclntyre and Co. Ltd. v. Mitter and Co. [1935] 39 CWN 557. The Calcutta High Court said that a foreign judgment given by default under summary procedure in the absence of appearance by the defendant and filing of any defence by him, and without any consideration of the plaintiffs evidence is not a judgment given on the merits of the case and thus it comes under the exception contained in section 13(b) of the Code of Civil Procedure. In the case of Ephrayim H. Ephrayim v. Turner Morrison and Co. [1930] 32 Bom LR 1178, the provisions of section 13(b) were once again considered. In that case, a foreign judgment was obtained from the court at Basra. The defendant had been served with the writ of summons. The defendant had given a power of attorney to a pleader in Basra which power of attorney was in force at the time when the suit was heard. On behalf of the defendants, the pleader applied for an adjournment ....
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....bank has emphasised the words "upon proof of plaintiffs claim". They have also produced the original guarantee which bears in one corner a sticker showing that it was exhibited before the Hong Kong court. The plaintiff-bank has not said in its affidavit that the documents which were tendered before the court were properly proved or that anybody on behalf of the bank had given evidence to establish the plaintiff's claim. This becomes relevant because it is the contention of the defendant that the guarantee which he had given was a blank and undated guarantee. It had been misused by the plaintiff-bank in the present case. The defendant has also relied upon alterations and erasures in the plaintiff-bank's register of guarantees to show that this undated guarantee was subsequently entered in the register by altering another entry to indicate that it was given around April 7, 1985. There is no material to show that these aspects of the dispute were ever examined by the Hong Kong court. The court seems to have proceeded to pronounce judgment in view of the defendant's failure to appear at the hearing of the case to defend the claim on merits. In my view, in these circumstances, the ca....
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.... sum which, apart from the said provisions and any such term, would be due, whether as debt, damages or otherwise, but- (a)the said provisions shall apply to sums required to be paid by any judgment or order of any court as they apply in relation to other sums; (b)no steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as the Central Government or the Reserve Bank, as the case may be, may permit to be paid ; and (c)... Under section 47(3), therefore, a suit for the enforcement of a guarantee for which permission of the Reserve Bank/Central Government would have been required under section 26(6) can be brought in India. Filing of a suit, therefore, on such a guarantee cannot be said to be contrary to any law in India because section 47, sub-section (3) expressly permits such legal proceedings in India. Such proceedings abroad cannot be said to be violative of any law in India. However, no steps can be taken for the purpose of enforcing any judgment or order for the payment of any sum under such a guarantee except in respect of so much thereof as the Central Go....