Gujarat High Court
Arun Kumar Jagatramka vs Ultrabulk A/S on 26 August, 2019
Author: R.M.Chhaya
Bench: R.M.Chhaya, B.N. Karia
C/SCA/8334/2019 CAV ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 8334 of 2019
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of
2019
In R/SPECIAL CIVIL APPLICATION NO. 8334 of 2019
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ARUN KUMAR JAGATRAMKA Versus ULTRABULK A/S ========================================================== Appearance:
MR VIVEK B GUPTA(5611) for the Petitioner(s) No. 1 MR MIHIR JOSHI, SR. ADVOCATE WITH MR HARSH N PAREKH(6951) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA and HONOURABLE MR.JUSTICE B.N. KARIA Date : 26/08/2019 CAV ORDER (PER : HONOURABLE MR.JUSTICE R.M.CHHAYA)
1. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner has challenged the order dated 10.04.2019 passed by Commercial Court, Rajkot below application exhibit 19 in Commercial Execution No. 04 of 2018 and has inter alia prayed as under -
"A. To allow this petition by quashing and setting aside order dated 10042019 passed below application Exh.19 in Commercial Execution No. 04/2018 by the Commercial Court at Rajkot holding that the Commercial Court at Rajkot does not have inherent jurisdiction to entertain and decide the said petition.
B. By way of interim relief, be pleased to
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stay further proceedings of Execution Petition No. 04/2018 pending before the Commercial Court at Rajkot pending admission, hearing and final disposal of this petition."
2. The respondent has filed the Civil Application for vacating the relief granted by this Court vide order dated 02.05.2019, whereby this Court was pleased to observe that it would be open for the petitioner to seek time before the Commercial Court at Rajkot and the same shall be granted.
3. The following noteworthy facts arise in this petition-
3.1 That the respondent filed Commercial Suit before the High Court of Justice, Queen's Bench Division, Commercial Court of England and Wales and by judgment dated 30.10.2017 and 09.11.2017 and order of Order of Costs dated 03.03.2017 and decree dated 09.11.2017 passed decree against the petitioner and the said judgments have become final. It deserves to be noted at this stage that the petitioner was the defendant in the said proceedings before the High Court of Justice, Queen's Bench Division, Commercial Court of England and Wales.
3.2 The properties of the petitioneroriginal defendant are situated at Jamnagar and as per Page 2 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER the provisions of the Commercial Courts, Commercial Civil and Commercial Appellate Division of High Courts Act, 2015 (hereinafter referred to as the "Act"), the Rajkot Commercial Court had the jurisdiction and therefore the respondent filed Commercial Execution Petition being Commercial Execution Petition No. 4 of 2019. The petitioner herein filed objections under section 13 of the Code of Civil Procedure before the Commercial Court at Rajkot against which the reply was filed by the respondent and even the rejoinder was filed by the present petitioner. The record indicates that affidavit of one Thomas Oliphant, who happens to be a Solicitor of the Senior Courts of England and Wales, has also been filed in Commercial Execution Petition No. 4 of 2019. The record indicates that thereafter the present application being application exhibit 19 came to be filed by the petitioner. The respondent herein filed a detailed reply and the petitioner filed rejoinder before the Commercial Court at Rajkot. The Commercial Court, Rajkot, by the impugned order dismissed the application below exhibit 19 and at that stage, the present petition is filed under Article 227 of the Constitution of India by the petitioner on the ground that the Execution Petition is not maintainable before the Commercial Court at Rajkot and that the Commercial Court of Rajkot Page 3 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER does not have inherent jurisdiction to decide the execution petition.
4. Heard Mr. Vivek Gupta, learned advocate for the petitioner and Mr. Mihir Joshi, learned Senior Advocate assisted by learned advocate Mr. Harsh N. Parekh, and learned advocate Mr. Rishabh Saxena.
5. Mr. Vivek Gupta, learned advocate appearing for the petitioner contended that while coming to the conclusion that the dispute between the petitioner and the respondent is commercial dispute as defined under section 2 (c) of the Act, the Commercial Court of Rajkot which has held that as the original transaction is a commercial dispute as per the Act and since the personal guarantee has been issued to secure those dues of the Gujarat Company, the dispute between the petitioner and the respondent company would be a dispute under section 2(c) of the Act. It was contended by Mr. Gupta that the Commercial Court at Rajkot has committed an error in coming to the conclusion that the personal guarantee also is a commercial dispute. Referring to para 16 of the judgment of the Hon'ble High Court of Justice Queen's Bench Division Commercial Court, Royal Courts of Justice (English Court), Mr. Gupta contended that the petitioner had given a personal guarantee which would not constitute a Page 4 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER commercial dispute as defined under the Act and therefore, the Commercial Court lacks inherent jurisdiction to entertain the Execution Petition filed before it. According to Mr. Gupta, the Execution Petition would only lie within the Court of Principal Civil Judge, Senior Division, at Jamnagar, which has territorial jurisdiction. On the aforesaid grounds, Mr. Gupta contended that the petition be allowed.
6. Per contra, Mr. Mihir Joshi, learned senior advocate has opposed this petition. Mr. Joshi contended that it is nothing but an attempt to delay the execution proceedings. Relying upon the judgment of this Court in the case of State of Gujarat v. Union of India reported in 2018 JX(Guj) 690, it was contended by Mr. Joshi that the present petition is not maintainable. It was contended by Mr. Joshi that as per the Division Bench Judgment as well as the judgments of the Supreme Court, the petition against the order of the learned Commercial Court against the interim order is not maintainable as provided under section 8 of the Act. Mr. Joshi contended that the original proceedings before the English Courts were before the Commercial Court having jurisdiction as it was a commercial dispute and even as per the provisions of the Act, the decree which is passed against the petitioneroriginal defendant would fall under the definition of the word "Commercial Dispute"
Page 5 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019C/SCA/8334/2019 CAV ORDER and therefore, execution petition is maintainable only before the Commercial Court having jurisdiction. It was contended that once
it is a commercial dispute before the English Court, the same would not change its nature and character at the stage of execution. Referring to para 16 of the judgment of the English Court, Mr. Joshi contended that the plain reading of the same would indicate that it is a commercial dispute and the liability upon the petitioner arises out of the commercial dispute. Mr. Joshi also relied upon the provisions of sections 124, 125, 126 as well as section 132 of the Indian Contract Act, 1872 and contended that the surety would mean that a person who gives guarantee is called surety. The person in respect of whose default the guarantee is given is called the 'principal debtor' and the person to whom the guarantee is given is called the 'creditor'. It was contended that the contract which was subject matter of the English Commercial Court does not provide anything to the contrary and the liability of the petitioner as a surety is coextensive. Referring to the observations made by the learned Commercial Court, Rajkot in the impugned order, Mr. Joshi contended that the Court below has correctly come to the conclusion that the application is maintainable and has rightly rejected the application filed by the petitioner. On the aforesaid grounds, Mr. Joshi contended that the present petition is Page 6 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER misconceived and the same is filed only with an oblique motive to delay the proceedings of execution before the Commercial Court and the same therefore, deserves to be dismissed.
7. No other or further submissions have been made by the learned advocates appearing for the parties.
8. At the outset, it deserves to be noted that the proceedings of Commercial Execution Petition No.4 of 2018, originally filed before the Commercial Court, Rajkot, as on date stands transferred to the Commercial Court at Jamnagar as per the amendment in the Act.
9. Having heard the learned advocates appearing for the parties and on perusal of the paper book which is supplied by the learned advocate for the petitioner, it clearly transpires that the dispute between the parties arose as a maritime claim. The proceedings were filed before the English Commercial Court, i.e., before the High Court of Justice, Queen's Bench Division, Commercial Court of England and Wales under the English law. The said proceedings have culminated into decree in favour of the respondent herein.
10. Section 2(c) of the Act reads as under -
"(c) "commercial dispute" means a dispute arising out of Page 7 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER
(i) ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents;
(ii) export or import of merchandise or services;
(iii) issues relating to admiralty and maritime law;
(iv) transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing of the same;
(v) carriage of goods;
(vi)construction and infrastructure contracts, including tenders;
(vii) agreements relating to immovable property used exclusively in trade or commerce;
(viii) franchising agreements;
(ix) distribution and licensing agreements;
(x) management and consultancy agreements;
(xi) joint venture agreements;
(xii) shareholders agreements;
(xiii) subscription and investment agreements pertaining to the services industry including outsourcing services and financial services;
(xiv) mercantile agency and mercantile usage;
(xv) partnership agreements;Page 8 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019
C/SCA/8334/2019 CAV ORDER (xvi) technology development agreements;
(xvii) intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits;
(xviii) agreements for sale of goods or provision of services;
(xix) exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum;
(xx) insurance and reinsurance;
(xxi) contracts of agency relating to any of the above; and (xxii) such other commercial disputes as may be notified by the Central Government.
Explanation. A commercial dispute shall not cease to be a commercial dispute merely because
(a) it also involves action for recovery of immovable property or for realisation of monies out of immovable property given as security or involves any other relief pertaining to immovable property;
(b) one of the contracting parties is the State or any of its agencies or instrumentalities, or a private body carrying out public functions;"
The bare reading of the definition of the word "Commercial Dispute" includes within its compass a dispute arising of the clauses provided under Page 9 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER section 2(c)(i) to (xxii).
11. It is an admitted position that the original dispute was filed as a commercial dispute before the English Courts and a decree has been passed and the same would not change its nature and character at the stage of execution and as succinctly set out by the learned Commercial Court in the impugned order the petitioner was the defendant before the English Courts. The judgment of the English Court provides as under-
"16. There is no dispute that Gujarat did not pay the Gujarat Liabilities, namely, US$4,259,395 by 31 December 2013. The question which arises is whether, in that event, on the true construction of the guarantee Mr. Jagatramka is obliged to pay a sum equivalent to US$4,259,395 or that sum, less US$ 1.95 million. That depends upon whether the guarantee provides for a primary liability arising upon demand or whether the guarantee is a true guarantee which provides for a secondary liability in the sense that the guarantor's liability mirrors the liability of the principal debtor. Whilst there is authority for the proposition that there is a presumption against construing an instrument as an on demand bond where it is not given by a bank or other financial institution (see Autoridad del Canal de Panama v Sacyr SA [2017] EWHC 2228 at at paragraph 81(4) per Blair J.) there is no doubt, in my judgment, that the instrument signed by Mr. Jagatramka provided for an on demand bond and that if such demand was validly made Mr. Jagatramka was bound to pay "a sum equal to US$4,259,395", not such sum as Gujarat was in fact liable to pay at that time. The following parts of the guarantee Page 10 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER lead to that conclusion:
i) Mr. Jagatramka agreed to pay "a sum equivalent to" the "Gujarat Liabilities"
which were defined as being US$4,259,395. Mr. Jagatramka did not agree to pay a sum of money to be determined by reference to Gujarat's actual liability at the material time.
ii) He "unconditionally and irrevocably"
guaranteed that if Gujarat did not pay the Gujarat Liabilities by 31 December 2013 he would, on demand, pay a sum equivalent to the Gujarat Liabilities. Such language is indicative of a primary liability.
iii) He "irrevocably confirms that he will not contest and/or defend application and/or proceedings to enforce" the guarantee. Again, such language is consistent with the primary liability and inconsistent with his liabttity being coextensive with that of Gujarat.
17. Mr. Stevenson had two alternative arguments in the event that the Court did not accept that Mr. Jagatramka was liable, pursuant to the guarantee, to pay a sum equal to the Gujarat Liabilities, namely, US$4,259,395. The first alternative argument was if Mr. Jagatramka's liability was coextensive with Gujarat's liabilities then those liabilities were those which arose under the Cooperation Agreements which currently exceed US$20 million. If that were wrong and Mr. Jagatramka's liability was coextensive with Gujarat's liability under the Deed of Agreement then the further alternative argument is that, having regard to the manner in which sums paid by Gujarat were appropriated, both by Ultrabulk and Gujarat, the liability of Mr. Jagatramka is in fact US$3,259,492.43. This further alternative argument is explained in a supplementary skeleton argument which I asked Mr. Stevenson to provide. It is to Page 11 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER be noted that Mr. Stevenson and those instructing him very properly reviewed the documentation and concluded that the sums paid by Gujarat in fact totalled US$2,452,471 (rather more than Mr. Jagatramka said had been paid) and further that by an email dated 9 July 2013 from Mr. Saigal some US$499,975 had been appropriated to the sums due under the Deed of Agreement.
18. In view of my conclusion that Mr. Jagatramka is liable under the guarantee for the sum of US$4,259,395 plus interest it is unnecessary for the court to consider the two alternative submissions made by Mr. Stevenson.
19. Ultrabulk is accordingly entitled to judgment in the sum of USS 4,259,395 plus interest (at the rate of LIBOR plus 2% in accordance with the terms of the guarantee) calculated up to the date on which formally hands down judgment. No doubt Mr. Stevenson will produce an updated schedule of interest on that date.
Finally, Ultrabulk seek a final antisuit injunction. The basis of this injunction was set out in the evidence of Mr. Clulow and the injunction was granted on an interim basis by me (ex parte) and subsequently continued by HHJ Waksman on the return date. There is no reason why the injunction should not be made final. Mr. Jagatramka has not amended his Defence to deny Ultrabulk's claim for a final injunction."
The personal guarantee reads that the personal guarantee shall cover any and all worldwide assets owned by the Guarantor, including, but not limited to property, bank accounts, land, Page 12 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER shares and/or any other assets whatsoever, legally and beneficially owned. The decree has become final and the certificate for enforcement of the decree in a foreign country has also been granted by the Commercial Court at England. The decree which is passed clearly indicates that the respondent entered into certain Cooperation Agreements with the Gujarat Company whereunder they agreed to long term charter vessels to be operated and the Gujarat Company ended being liable to enforceable debt to the respondent, which as on 31.03.2013 was USD 43,00,000/ and in terms of the recital of the personal guarantee, the liability of the petitioner has triggered automatically on the Gujarat Company having made default in discharge of the debt of USD 4,259,395 as on 31.12.2013 as per the debt deferment agreement.
12. Thus, it is crystal clear that the liability of the petitioner is based upon the maritime claim, which is a commercial dispute and the personal guarantee which has been given by the petitioner is under commercial dispute, which arose before the English Court. It clearly appears from the record that the decree has become final as the petitioner has not been able to point out before this Court that it has been challenged by the petitioner before the competent appellate jurisdiction, which has become final in November 2017 and thereafter, the respondent herein has Page 13 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER preferred an application for its execution before the competent court. The contention raised by the learned counsel for the petitioner that the Commercial Court at Rajkot (now Jamnagar) has no jurisdiction is totally meritless. The learned Commercial Court at Rajkot has very succinctly dealt with the aspect of personal guarantee and the commercial dispute, more particularly in paras 18, 23 and 30 of the impugned judgment and order. As stated above, even considering the definition of the word "commercial dispute", the execution petition is maintainable before the Commercial Court having jurisdiction, i.e., originally Rajkot and now Jamnagar. What is sought to be executed by the respondent is a maritime claim as per decree by the Commercial Court at England and therefore, the dispute in the present matter is a commercial dispute as rightly held by the Commercial Court at Rajkot in all four circumstances as narrated in the impugned judgment.
13. The record clearly indicates that the petitioner has participated before the English Commercial Court and has not contended or objected that it is not a commercial dispute. Even independently examining the same, the Commercial Court at Rajkot has come to the conclusion that it is a commercial dispute and that Commercial Court at Rajkot, now at Jamnagar has inherent Page 14 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER jurisdiction to try and decide the execution petition filed by the respondent. Even considering the ratio laid down by the Division Bench of this Court in the case of State of Gujarat (supra), the Commercial Court, Rajkot has rightly exercised the jurisdiction and no interference is called for by this Court in exercise of its supervisory jurisdiction under Article 226 of the Constitution of India. There is no error much less any error manifest and apparent on the face of the proceedings nor a grave injustice or gross failure of justice has occasioned in the case on hand. On the contrary, the record indicates that having filed objections under section 13 of the CPC before the Commercial Court at Rajkot, only with an aim and object to delay the execution proceedings, the petitioner filed the present application exhibit 19 and on its dismissal, the present writ petition under Article 227 of the Constitution of India.
14. The learned Commercial Court at Rajkot, while dealing with application at exhibit 19, has threadbare considered the same and has correctly interpreted the provisions of the Act as well as the provisions of section 126 of the Indian Contract Act in particular. It would not be out of place to record that having participated in the proceedings before the English Commercial Court, having given a guarantee and the judgment Page 15 of 17 Downloaded on : Wed Aug 28 22:04:19 IST 2019 C/SCA/8334/2019 CAV ORDER of English Court having become final, only with a view to throw spanner in the execution of such decree, the present petition is filed only with a view to create hurdle and delay the execution proceedings, which is nothing but an abuse of the process of the Court. We confirm the findings of the Court below and the Commercial Court having jurisdiction, has jurisdiction to entertain the execution petition filed by the respondent. The petition is devoid of any merits and the same is liable to be dismissed and is hereby rejected in limine with cost of Rs. 25,000/ to be deposited by the petitioner within a period of one week with Gujarat High Court Legal Services Committee.
15. Interim direction given by this Court in the present petition vide order dated 02.05.2019 stands vacated.
16. As the main matter is disposed of, the Civil Application would not survive and the same shall also stand disposed of accordingly.
(R.M.CHHAYA, J)
(B.N. KARIA, J)
BIJOY B. PILLAI
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