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2016 (3) TMI 507 - HC - Indian LawsRepayment of maturity proceeds of the commercial papers as well as on dishonoured cheques - decree in the sum of ₹ 25 crores along with interest at the rate of 18% per annum - claims arise from written contracts contained in what are known as Series 1 Commercial Papers and also in a letter dated 10 July 2012 issued by the Defendant in favour of Plaintiff No.1 - Held that - n appeal under Section 25 is a continuation of the inquiry under Section 16. It will be preposterous to suggest that whereas at the trial stage the suspension provision of Section 22 would require an inquiry under Section 16(1) to be pending, that is to day, a registration under Section 15(1) as having been accomplished, but that at the appellate stage, a registration under Section 15(1) need not be accomplished and no inquiry under Section 16 need to be pending, but that pendency of an appeal even if it be at the preregistration stage entails a consequence under Section 22, namely, suspension of legal proceedings, contracts, etc. in respect of the company under reference. Section 22 clearly indicates that at the trial stage, namely, at the level of BIFR, an inquiry ought to have commenced before Section 22 comes into play. That is the earliest stage in the reference at which Section 22 is triggered. As I have indicated above, that is not the stage at which we are in the present case. Be it at the level of BIFR or at the level of AAIFR, we are still effectively at the preregistration stage. There is no question, in the circumstances, of application of Section 22 to the facts of the present case. The suits are, thus, not required to be stayed. There is no dispute between the parties that the trades were so reported. The RBI has assigned FIMMDA the task of prescribing operational guidelines for smooth functioning of the commercial paper market in line with international best practices. Operational guidelines issued by FIMMDA effective from June 31, 2001 make detailed provisions regarding trading in commercial papers and the process of redemption upon maturity of the commercial papers. These guidelines lay down a procedure for secondary market transactions in a commercial paper. Nothing could be pointed out by learned Counsel for the Defendant to show that there is any breach in the present case of either the Master Circular issued by RBI or the operational guidelines issued by FIMMDA so as to question either the transfer of the commercial paper from the original holder, namely, IDFC to Plaintiff No.2 or from Plaintiff No.2 to Plaintiff No.1. In fact, the correspondence between the parties, which is uncontested, clearly indicates that the Defendant had not only acknowledged the transfer of the commercial papers in favour of Plaintiff No.1, but had addressed an unequivocal and irrevocable confirmation and acknowledgement of its liability and indebtedness to Plaintiff No.1 for the sums of ₹ 25 crores each towards the payment of maturity proceeds of the subject commercial papers. The Defendant irrevocably confirmed and bound itself to repay the amounts of both commercial papers to Plaintiff No.1 and also interest on delayed payment at the rate of 18% per annum on an annual compounding basis. In these facts, there is no defence on merits as far as the suit claims are concerned. The rationale of this is that the letter contains a promise to pay; and every promise is a proposal by which the proposer signifies his willingness to do or abstain to do anything, in this case to pay. The proposal becomes a promise only when it is accepted, though to create such promise it is not necessary that there should be an acceptance in writing. The promissee may simply accept the promise before the action. The communication, thus, of the promise to the promissee is complete only when the promissee receives such communication at which place alone he can be said to have signified his acceptance of the promise (at least where there is no other evidence of such acceptance). The debt confirmation letter is clearly addressed by the Defendant to Plaintiff No.1 at its office in Worli, Mumbai and is communicated at that place. A part of the cause of action can certainly be said to have arisen at Mumbai. Upon leave being granted under clause 12 of the Letters Patent, this court clearly has jurisdiction to entertain and try the present suits. The following order is passed (i) The Defendant is granted leave to defend the suits subject to and on payment, respectively, of a sum of ₹ 27,37,94,521/- in Suit No.280 of 2013 and a sum of ₹ 25,69,04,110/- in Suit No.804 of 2013 within a period of twelve weeks from today; (ii) Upon the payments being made, the suits be transferred to the list of commercial causes; (iii) Written statements to be filed within a period of six weeks from the date of deposit of the amounts in terms of clause (i) above; (iv) The Prothonotary & Senior Master to invest the amounts deposited by the Defendant, if any, in fixed deposit/s of Nationalised Bank initially for a period of one year, thereafter to be renewed from time to time, so as to abide by the final orders that may be passed in the suits; (v) The Summonses for Judgment are disposed of accordingly.
Issues Involved:
1. Suspension of legal proceedings under Section 22 of SICA. 2. Validity of registration of reference under Section 15(1) of SICA. 3. Territorial jurisdiction of the court. 4. Merits of the summary suits for recovery of money. Detailed Analysis: 1. Suspension of Legal Proceedings Under Section 22 of SICA: The Defendant argued that the summary suits should be stayed due to the pendency of an appeal before the AAIFR, invoking Section 22 of SICA. Section 22 mandates that legal proceedings should be stayed if an inquiry under Section 16 is pending, a scheme under Section 17 is under preparation or consideration, a sanctioned scheme is under implementation, or an appeal under Section 25 is pending. Upon examining the facts, it was determined that the registration of the reference was not valid as the Defendant was not an industrial company under SICA. The Board for Industrial and Financial Reconstruction (BIFR) had declined to register the reference, and this decision was upheld by the AAIFR. Therefore, there was no inquiry under Section 16, and the appeal did not relate to an industrial company. Consequently, Section 22 did not apply, and the suits were not required to be stayed. 2. Validity of Registration of Reference Under Section 15(1) of SICA: The Defendant's reference was initially conditionally registered by the Registrar - BIFR, subject to submission of final accounts. However, the conditional registration was later withdrawn due to deficiencies, and the reference was not registered. The Defendant's appeals to the Secretary and Chairman of BIFR were dismissed. The Delhi High Court directed BIFR to reconsider the validity of the registration, which BIFR concluded was not valid. The court noted that registration under Section 15(1) is crucial for commencing an inquiry under Section 16. Since the reference was not validly registered, the inquiry under Section 16 had not commenced, and thus, Section 22 could not be invoked to stay the proceedings. 3. Territorial Jurisdiction of the Court: The Defendant contested the court's territorial jurisdiction, claiming it did not carry on business within the local limits of the court. However, the suits were based on written contracts, including a debt confirmation letter addressed to the Plaintiff in Mumbai. The court held that a substantial part of the cause of action arose in Mumbai, where the promise to pay was communicated and accepted. Therefore, the court had jurisdiction to entertain the suits, and leave was granted under clause 12 of the Letters Patent. 4. Merits of the Summary Suits for Recovery of Money: The suits were based on written contracts contained in "Series 1 Commercial Papers" with maturity amounts of Rs. 25 crores each. The Defendant had defaulted on payments, and the commercial papers were transferred to the Plaintiffs, who sought recovery of the amounts along with interest. The Defendant's defences regarding the validity of the transfer were found to be without merit, as the trades were reported in compliance with RBI and FIMMDA guidelines. The Defendant had also acknowledged its liability in correspondence with the Plaintiffs. Given the clear acknowledgment of debt and the absence of any substantial defence, the court found no statable defence to the suits. However, as a measure of mercy, the Defendant was granted leave to defend the suits on the condition of depositing the entire suit amounts in court. Order: 1. The Defendant was granted leave to defend the suits subject to the deposit of Rs. 27,37,94,521/- in Suit No.280 of 2013 and Rs. 25,69,04,110/- in Suit No.804 of 2013 within twelve weeks. 2. Upon deposit, the suits would be transferred to the list of commercial causes. 3. Written statements to be filed within six weeks from the date of deposit. 4. The Prothonotary & Senior Master to invest the deposited amounts in fixed deposits of a nationalised bank. 5. The Summonses for Judgment were disposed of accordingly.
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