M-S. INTERNATIONAL WOOLEN MILLS v. M-S. STANDARD WOOL (U.K.) LTD

Citation: [2001] 3 S.C.R. 166

Court: Supreme Court of India

Bench: V.N. KHARE, S.N. VARIAVA

Judgment text

MIS. INTERNATIONAL WOOLEN MILLS v. MIS. STANDARD WOOL (U. K. ) LTD. APRIL 25, 2001 [V. N. KHARE AND S. N. VARIAVA, JJ. ] Code of Civil Procedure, 1908: Section 11 explanation IV-Canstructive res-. iudicata-Second application filed before any decision on the first application-Held, second application cannot be barred by principles of res-judicata or constructive res-judicata.

Sections 13(b) and 44-A-Decree-Foreign judgment and decree- Enforcement of-Suit for recovery of price of goods supplied-Ex-parte judgement and decree passed-'-Does not indicate whether documents were looked into or merits considered-Held, such decree not on merits and cannot be enforced in India-Evidence Act, 1872-Section 114, illustration (e)-Presumption-Sections 101 and 102-Burden ofproof Documents and particulars endorsed with statement ofc/aim-Ex1>arte decree based thereon-Held, such decree not on merits-Court to consider case on merits by looking into evidence led by plaintiff and documents proved before it-Also such a decree cannot be said to be the same as if defendant appeared and contested the suit and therefore on merits. { ' Appellant placed orders with Res11ondent for certain goods. On receiving the goods appellant found them to be ofinferior quality and refused payment. Aggrieved, Respondent filed a suit is the Central London County Court in United Kingdom.

An exparte decree was passed. Respondent fded an execution apulication in the Court of Civil Judge (Senior Division) Ludhiana. Appellant filed an application for dismissal of execution application as it was filed without following the procedure 1>rescribed in Sections 38, 39 and 40 of the Code of Civil Procedure, 1908. Respondent contended that the execution was under Section 44A of the Code. Whilst the Application for dismissal was still pending, the appellant filed an:>ther application stating that the decree was not on merits and as per the provisions of Section 44A read with Section 13 (b) of the Civil Procedure Code, the Court had to refuse to execute the ~ INTERN. WOOLEN MILLS v. STANDARD WOOL (U. K. ) LTD. 167 decree. Both the ap1llications were heard together and dismissed. On revision High Court found that the decree was not on merits but it still dismissed the .. :. revision on the ground that the second application was barred by the principles . ,.

of constructive res-judicata. Hence these cross appeals. Disposing of the appeals, the Court HELD: 1. Section 11 explanation IV of the Code of Civil Procedure comes into play only if some decision has been finally given before the second application was filed. In that event it could have been urged that all available points should have been urged before that decision was given. In the instant - e covered by Explanation IV. to Section 11 of·the Code of Civil Procedure. He submitted that in the earlier Application fue defence regarding non compliance of Section 13(b) could have been taken but had not been taken. He submitted that it was not open to the Appellants to take such a defence in a subsequent Application. In ·our view there is no substance in this submission. Explanation IV to Section 11 of the Code of Civil procedure would have come into play only if some decision had been finally given before the second Application was filed. In ...

, that event it could have been urged that all available points should have been urged before that decision was given. In this case the second Application was filed before any decision on the first Application was given. The Appellants could have, instead of filing a second Application, amended their first Application and taken these pli;:as in that Application itself. H~d they amended the first Application there would be no bar of res-judicata or constructive res judicata. If that be so one fails to understand how the second Application was barred by principles of res-judicata or constmctive ~~ res- judicata. To be remembered that the Orders were passed after hearing >. arguments on both the Applications. Under such circumstances n~)question arises of their being any res-judicata or constructive res-judicata. At this stage it must be mentioned that Mr. Hingorani relied upon cases ofJanki Vallabh v. Moolchand and others, reported in AIR (1974) Rajasthan 168; Baijnath Prasad Sah v.

Ramphal Sahni and another, reported in AIR (1962) Patna 72; P. K. Vijayan v. Kamalakshi Amma, reported in AIR (1994) SC 2145 and Mohan Lal Goenka v. Benoy Krishna Mukherjee and Ors. , reported in (1953) SCR 377 in support of his submission that the principles of resjtidicata and/or constructive res-judicata also apply to execution proceedings. It is not necessary to deal with these authorities as there can be no dispute -{ I to the proposition that principles of res-judicata and/or constructive resjudicata apply to execution proceedings. However, as stated above, in this .. i.. case there was no final decision which operated as res-judicata. -~ The second question which arises is whether the above mentioned decree of the English Court could be executed in India. Section 44-A of the '.

B Code of Civil Procedure ·reads as follows : "44-A (l) 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 Court. ~ (2) Together with the certified copy of the decree shall be filed a certificate from such superior Court stating the extent, ifany, to which the decree has been satisfied or adjusted and such certificate shall, for the purpose~ of proceedings under this section, be conclusive proof of the extent of such satisfaction or adjustment. (3) The provisions of section 47 shall as from the filing of the. certified copy of the decree apply to the proceedings of a District ,.. -- I Exceptions in clauses (a) to (f) of Section 13. ... , Section 13 reads as follows : ).... " "13.

A foreign judgment shall be conclusive as to any matter thereby directly 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; r (b) where it has not been given on the merits of the case; ,.. _ ic (c) where it appears on the face of the proceedings to be founded on any incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable; .. (d) where t11e proceedi'ngs 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. Thus under sub-clause (b) if the decree has not been given on the merits of the case then the foreign judgnient is not conclusive between the parties and the same cannot be executed in India.

The question which then arises is ·whether the Decree, set out herein, above can be said to be a decree on merits. Parties have cited a large number L of authorities of various High Courts on the question as to when a decree ....... can· be said to be on merits. In support of the contention that the above mentioned decree is on merits reliance has been placed upon the case of Sheikh Abdul Rahim alias S. A. Rahim v. Mohamed Din and another, reported in AIR (1943) Calcutta 42. In this case it has been held by the Calcutta High Court that a person asserting that the judgnient was not o~ merits be~use no evidence was given must prove the same as there is a presumption in Section 114 ofthe Evidence Act that judicial acts have been regularly performed. Ori this principle the >- Calcutta High Court has held that even though a decree was gi~n ex-parte the same must be presumed to be on merits. In our view the law laid down .. ·.. in this case· cannot be said to be the correct law.

Section 114 merely raises .. /.. the presumption, under illustration (e) thereof, that judicial acts have been . , regularly performed. To say that a decree has been passed regularly is completely different from saying that the decree has been passed on merits. An ex-parte decree passed without consideration of merits may be decree passed regular if permitted by the rules of that Court. Such a decree would B· be valid in that country in which it is passed unless set aside by a Court of Appeal. However, even though it may be a valid and enforceable decree in that country, it would not be enforceable in India if it has not been passed '(' on merits. Therefore for a decision on the question whether a decree has been • passed on merits or not, the presumption under Section 114 would be of no help at all.

It must be mentioned that in support of submission that it must be presumed that all formalities were complied with and the decree passed regularly reliance was also placed on cases of Krishna Kumar v. State of - Haryana reported in, AIR (1999) SC 854 and The Commissioner ofIncome Tax~ A. P. v. M Chandra Sekhar reported in, AIR (1985) SC 114. In our view these authorities are of no help in deciding the question under consideration. Even if we presume that all formalities were complied with and Decree was passed regularly it still would not lead to the conclusion that it was passed ~ on rr,erits. In the case ofMiddle East Bank Ltd. v. Rajendra Singh Sethia reported in AIR 1991 Calcutta 335 a decree had been passed ex parte and without service ofnotice on the judgment- debtor. A number of authorities were cited before the Court including the case ofAbdul Rahim (supra).

The Court held that even though a decree may be ex parte it may still be on merits provided it could be shown that the Court had gone through the case made out by the ~ Plaintiff and considered the same and taken evidence ofthe witnesses put up by the Plaintiff. It was held that if an ex parte decree was passed in summary manner under a special procedure without going into the merits and without taking evidence then those decrees would not be executable in India. Based on this authority it was submitted that a decree could be said to be not on merits only if it is passed in a summary manner in any special or summary procedure. It was submitted that such a decree i. e. a decree which has not been passed in a summary manner in a summary proceeding would be a decree on merits. This authority itself makes it clear that the decree would not be on merits if Court has not gone through and considered the case of - ---..

disclosed by the pleadings before the Court, if the defendant did not, in spite of notice of action, choose . to appear and defend it, the judgment passe9 by the Court in plaintiff's favour was not the less a judgment on the merits, because it \Vas not founded upon detailed evidence which the plaintiff might have produced had the defendant entered an appearance and contestell the claim. The position to my mind is the same as if the defendant had appeared and confessed judgment.

In support of his contention that the judgment in question 'r cannot be considered as one-passed on the merits, the appellant's tcounsel has relied on the following passage in Sir William Rattigan's Private International Law (1895) at pages 234-235: "It would seem to be equally plain that, if, for instance, it should happen that by the law of a foreign country, a plaintiff was entitled to judgment simply on the non-appearance of a defendant who had "been duly served, and without adducing any evidence whatever in support of his claim, or if the wrong-headedness of a foreign Judge should induce him to so decide, the plaintiff would not be entitled in >- was not on the merits. That is not the real test. The real test is not whether the decision was or was not ex parte, but whether it was merely formally passed as a matter of course or by way of penalty or it was based on the consideration of the truth or otherwise of the --j plaintiff's claim.

" We are in respectful agreement with the view taken in these two cases. " In our view this authority lays down the correct law. In the case ofR. M V Vel/achi v. R. MA. Ramanathan Chettiar, reported in AIR 1973 Madras 141, the facts were almost identical to the present case. -. - In that case also an ex parte decree had been obtained. In this case it was '}held as follows : . "The Law of Civil Procedure govemin:g the institution of suits,· service pf summons upon the defendant, the. liberty to. the p~aintiff to apply for a decree against the defendant in case of the defendant's default of appearance, in tI1e Supreme Courts ofPenang and Singapore, are all similar and identical and are on the same pattern as the procedural laws in England, i. e. , "'fhe Rules of the Supreme Court": The Full. · Bench decision of this. Court referred to above in ILR 50 Mad 261 = .... (AIR 1927 Mad 265) (FB) which dealt with the enforce~bility of .

judgment obtained in the Supreme Court of Penang has been followed in almost all the High Courts. This decision was rendered about 45 years back and had been uniformally followed·by this Court~ (Vide: the Bench decisionof Jagadisan, J. and Kailasam, J. , in Sivagalninatha v. Nataraja, AIR 1961Mad385. It is unnecessary to refer to all the cases and it is sufficient to refer to the latest Bench decision of this Court reported in Mohammad Sheriffand Co. V. Abdul Jabbar, ILR (1966) '· - l M. ad 18 in which a Bench of this Court had to deal with a similar problem arising out of a foreign judgment rendered by the Supreme Court of Singapore on default of appearance of the defendant. Veeraswami, J. , (as he then was), delivering the judgment on behalfof the Bench, after referring to the relevant decisions, has followed and applied the principle enunciated by the Full Bench.

The learned Judge pointed out that the decree that followed as a matter of course solely on account of the default of the defendant's appearance could not be a judgment on merits, as no evidence was -/ adduced and there was no judicial consideration of the tenability or .. justness of the claim. In view of this recent pronouncement of the Bench of this Court which is binding upon us, the matter does not require further elaboration. It is true that under Section 44-A subclause (3), the burden is upon the defendant who resists execution, . to establish, to the satisfaction of the Court which is called upon to execute the decree, that the foreign decree suffers under any one of the infim1ities covered by any of the exceptions specified in clauses (a) to (f) of Section 13, Civil Procedure Code. We may refer to the Bench decision of the Calcutta High Court in Abdul Rahim v. Mohamed Din, AIR (1943) Cal 42.

In the instant case, the respondent has discharged his burden by placing ample materials that the foreign judgment cannot be executed because the High Court of Singapore was not a "Court of competent jurisdiction" within the meaning of Section 13 (a) and that the defendant has not voluntarily submitted to the decision of the Tribunal and also that the decree of the High Court of Singapore was not given on the merits ofthe case within the meaning of Section 13 (a). " On the basis of this law let us now see whether the present decree is a decree . on merits. It is to be seen that between the parties there is a controversy whether the AppeUant/defendant was at all served. As stated above it is not necessary for us to resolve this controversy. For the purposes . >-ofthis Order only we will presume that the Appellant had been served. Facts on record disclose that before service was effected an affidavit had.

been filed in the English Court by one Kaashif Basit, Solicitor for the Respondent, to which affidavit had been annexed copies of the invoice and other relevant documents. On the basis ofthis affidavit an order in the following terms came to be passed : "UPON reading the Affidavit of Kaashif Basit sworn 20 January Im. IT IS ORDERED that the Plaintiffbe at liberty to serve the Summons in this action on the Defendant at 31, Industrial Area-A, Ltidhiana- 141003, Punjab, India, or elsewhere in India, and that the tjrne for acknowledging service shall be 23 days after service ofthe Summons on the Defendant. " This shows that leave to serve the Appellant was granted after reading the ·affidavit Thus at this stage the Court had presumably seen the documents .. ,. _. annexed thereto. The·Court has been careful enough to note that it had read the affidavit. However, at this stage, only a prima facie opinion was being (' INTERN. WOOLEN MILLS v. STANDARD WOOL (U. K. ) LTD. [S. N. VAID. AVA, J.

] 187 ... formed. Thereafter the said Mr. Kaashif Basit, Solicitor for the Respondent had filed an affidavit of service stating that service had been effected on one Yash Paul, who is claimed to be an employee of the·Appellant. To this Affidavit also all relevant documents were annexed. Thereafter no documents are tendered nor any evidence led. The English Court then pronounces the judgment and decree, which has been set out herein above. It does not even say that the second Affidavit had been read. This Judgment and decree does not indicate whether any documents were looked into and/or whether the merits of the case was at all considered. It merely grants to the Respondent a decree for the amounts mentioned therein. To be noted that the Appellant .... had, by his letter dated 8th November, 1997, replied to the Notice of the Respondent dated 18th October, 1997. In this reply it had been mentioned that goods were of inferior quality and not as per contract.

Court has not applied its mind or dealt with this aspect. It has not examined points at controversy between the parties. It is given ex-parte as Appellant did not appear at hearing of Suit. It is not a judgment on merits. On the principies oflaw enunciated herein above, in our view, it is clear that such a decree cannot be said to be a decree on merits. Such a decree. cannot be enforced in India. In this view of the matter Civil Appeal No. 3316 of2001 [arising out of SLP (Civil) No. 2250 of 2000] is allowed and the Application of the Appellant that this decree cannot be enforced in India as it is not on merits is made absolute. Civil Appeal No. 3317 of 2001 [arising out of SLP (C) No. 5332 of 2000] stands dismissed. There will be no order as io costs in both the Appeals. NJ. C. A No. 3316/2001 allowed. C. A No. 331712001 dismissed.