2022 (4) TMI 1612 - HC - Indian Laws

Seeking rejection of the plaint - application under Order VII Rule 11 of the CPC - commencement of bankruptcy proceedings in Japan - Maintainability of the suit as a commercial dispute - Cause of action and requirement of loan documents - Applicability of Section 44A of CPC regarding non-reciprocating territory - Conclusiveness of the foreign judgment - Applicability of Japanese law and limitation period - Filing of additional documents - Default of the defendant no.1 in respect of his loan obligations towards the bankers/financiers in Japan - Commercial dispute under the Commercial Courts Act, as the suit properties are residential properties - HELD THAT - The cause of action for filing the present suit is the default of the defendant no.1 in respect of his loan obligations towards the bankers/financiers in Japan, resulting in him being declared bankrupt by the competent Courts in Japan. The suit has been filed to administer the suit properties of the bankrupt defendant no.1 towards realization of monies. So, it is squarely covered by the language of Section 2(1)(c) of the Commercial Courts Act and the Explanation thereto. Therefore, it would be irrelevant if the said properties, in respect of which relief is claimed, are residential properties or not and the present suit would be maintainable as a commercial suit. Even otherwise, if the suit is not taken to be a commercial suit, this Court has the power to convert a commercial suit into an ordinary suit and proceed to hear the matter. This cannot be a ground for rejection of the suit. The suit has been valued in excess of Rs. 10 crores and ad valorem court fees thereon has been paid by the plaintiff. It is not denied that this Court has the territorial and the pecuniary jurisdiction to hear the present suit, even if it is taken to be an ordinary suit. Cause of action - The present suit has been filed only towards administration of assets of the defendant no.1 and not for recovery of the loan amounts from the defendant no.1. Therefore, there is no merit in the contention of the applicant/defendant no.2 that the plaintiff was obligated to file the loan documents as well as the guarantee agreements or the details of outstanding amounts. The scope of application under Order VII Rule 11 of the CPC is limited only to the extent whether or not in terms of averments made in the plaint and the documents filed along with the plaint, the suit is maintainable. Applicability of Section 44A of CPC regarding non-reciprocating territory - The plaintiff is not seeking execution of the decree of the Japanese Court. The suit has been filed to administer the suit properties of the bankrupt defendant no.1 towards realization of monies. Therefore, Section 44A of the CPC would have no application. Evidentiary value of order passed by the Tokyo District Court in India - Applying the principles laid down in Marine Geotechnics LLC v. Coastal Marine Construction Engineering Ltd. 2014 (3) TMI 715 - BOMBAY HIGH COURT , to the facts of the present case, it cannot be said that judgment dated 17th June, 2016 of the Tokyo High Court, dismissing the appeal filed on behalf of the defendant no.1, falls under any of the exceptions provided in Section 13 above. On the face of it, the aforesaid judgment fulfils the requirement of due process and was passed after noting the various contentions raised on behalf of the defendant no.1. Therefore, the aforesaid judgment would be conclusive as to the defendant no.1 being declared bankrupt in Japan and the plaintiff being appointed as the bankruptcy trustee to administer the estate of the defendant no.1, even outside Japan. The plaintiff, who is the bankruptcy trustee, in the present proceedings is not seeking to execute the aforesaid judgment in terms of Section 44A of the CPC, but is acting in furtherance of the said judgment so as to administer the estate of the defendant no.1, who has been adjudicated as being bankrupt in Japan. There is no bar under the provisions of the IBC against filing such a suit. Therefore, there is no merit in the contention that the plaintiff does not have the locus standi to file the present suit. Conclusiveness of the foreign judgment - Applying the principles in SRM Exploration Pvt. Ltd. v. N S N Consultants 2012 (5) TMI 155 - DELHI HIGH COURT , the judgments passed by the foreign courts have to be respected by the Indian Courts, unless the same are shown to be falling under the limited exceptions provided in Section 13 of the CPC. There is no reason why a person who has been declared bankrupt by a foreign court in terms of the law applicable to that jurisdiction, should be afforded protection by the Indian Courts on technical objections being raised with regard to the validity of the foreign judgment. In the modern times of globalization, foreign creditors cannot be treated differently from domestic creditors. Applicability of Japanese law and limitation period - In my view, for a suit filed in India, the limitation would have to be seen under the Indian law and not foreign law. In terms of Article 101 of Schedule to the Limitation Act, the prescribed period of limitation is three years from the date of a judgement, including foreign judgement. It is not the case of the defendants that the present suit is time barred under the Indian laws of limitation. The judgment of the Supreme Court in Bank of Baroda 2020 (3) TMI 1472 - SUPREME COURT was in the context of limitation for the execution of a foreign decree u/s 44A of the CPC. It was in that context that the Supreme Court gave a finding that the issue of limitation is a matter of substantive law and not procedural law. Therefore, the present suit cannot be rejected on the ground of limitation at the present stage. Filing of additional documents - The plaintiff sought leave to file additional documents, which were in Japanese and had to be translated. The court allowed the application, noting that the documents are necessary for proper adjudication and were filed before issues were framed. The plaintiff provided a reasonable cause for the delay, and no prejudice would be caused to the defendants. Accordingly, the present application is allowed and the documents, sought to be filed along with the present application, are permitted to be taken on record.

Summary

Issues Involved:
1. Whether the present suit qualifies as a "commercial dispute" under the Commercial Courts Act.
2. Whether the plaintiff has locus standi to file the suit.
3. Whether the suit is barred by limitation.
4. Whether the suit is maintainable under Order VII Rule 11 of the CPC.
5. Whether the plaintiff can file additional documents under Order XI Rule 1(5) of the CPC.

Summary:

Issue 1: Whether the present suit qualifies as a "commercial dispute" under the Commercial Courts Act.

The court held that the present suit qualifies as a commercial dispute under Section 2(1)(c) of the Commercial Courts Act because it arises from a loan transaction and involves the administration of the suit properties of the bankrupt defendant no.1 towards realization of monies. The nature of the properties (residential or commercial) is irrelevant. The judgments in Ambalal Sarabhai Enterprises Limited v. K.S. Infraspace LLP and Soni Dave v. Trans Asian Industries Expositions Pvt. Ltd. were distinguished and found not applicable to the present case.

Issue 2: Whether the plaintiff has locus standi to file the suit.

The court found that the plaintiff, as the Bankruptcy Trustee appointed by the Japanese court, has the locus standi to file the suit. The suit is not for the execution of the Japanese court's decree but to administer the suit properties of the bankrupt defendant no.1. The principles of comity of nations and Sections 13 and 14 of the CPC were applied to respect the foreign judgment, which was found to be conclusive and not falling under any exceptions provided in Section 13.

Issue 3: Whether the suit is barred by limitation.

The court held that the limitation for the suit should be calculated under Indian law, not Japanese law. Under Article 101 of the Limitation Act, the prescribed period is three years from the date of the foreign judgment. The suit was filed within this period, making it within time. The court also noted that the issue of limitation is a mixed question of facts and law, unsuitable for rejection under Order VII Rule 11 of the CPC.

Issue 4: Whether the suit is maintainable under Order VII Rule 11 of the CPC.

The court rejected the application u/O-VII R-11 of CPC filed by defendant no.2, finding no merit in the contentions regarding the lack of cause of action, non-reciprocity of Japanese courts, and the alleged bar under Japanese law. The court emphasized that the scope of Order VII Rule 11 is limited to the averments made in the plaint and the documents filed along with it. The suit was found to be maintainable, and the application was dismissed with costs of Rs.1,00,000/- payable by defendant no.2.

Issue 5: Whether the plaintiff can file additional documents under Order XI Rule 1(5) of the CPC.

The court allowed the plaintiff to file additional documents, finding the reasons for the delay (documents were in Japanese and needed translation) to be sufficient. The documents were deemed necessary for the proper and effective adjudication of the suit, and no prejudice would be caused to the defendants. The application was allowed, subject to the payment of Rs.50,000/- as costs, which could be set-off against the costs imposed on defendant no.2.