Bombay High Court
Arf Sv 1 Sarl vs Suresh Tulsidas Bhatia on 1 April, 2024
Author: Bharati Dangre
Bench: Bharati Dangre
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN IT'S COMMERCIAL DIVISION
INTERIM APPLICATION (L) NO.28351 OF 2023
IN
COMMERCIAL EXECUTION APPLICATION (L) NO. 28117
OF 2023
ARF SV 1 Sàrl )
Incorporated in Luxembourg )
Having its registered office address at )
2, Avenue Charles de Gaulle, L-1653, )
Luxembourg, Grand Duchy of Luxembourg. ) ... Applicant
In the matter between:
ARF SV 1 Sàrl )
Incorporated in Luxembourg )
Having its registered office address at )
2, Avenue Charles de Gaulle, L-1653, )
Luxembourg, Grand Duchy of Luxembourg. ) ... Applicant /
Org. Judgment Creditor
Versus
1. Suresh Tulsidas Bhatia )
Office address at Al Omran Building 172, )
Office 102-105, Level 1, Kuwait Street, )
Maisaloon Area, PO Box 5968 Sharjah, )
UAE also having his address at )
Flat No. 8, Solitaire Apartment, )
8th Floor, Nargis Dutt Road, Pali Hill, )
Bandra West, Mumbai - 400051. )
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2. Rajeev Suresh Bhatia )
Office address at Al Omran Building 172, )
Office 102-105, Level 1, Kuwait Street, )
PO Box 5968 Sharjah UAE )
also having his address at 4303, B Wing, )
Lodha Blue Moon, )
Pandurang Bhudhkar Marg, )
Opp Hardrock Café, Worli, Mumbai - 59. )
3. Bhatia Trading Co. LLC )
having its regd office at )
Al Omran Building 172, )
Office 102-105, Level 1, )
Maisaloon Area, PO Box 5968 )
Sharjah United Arab Emirates. ) ... Respondents /
Org. Judgment Debtors
...
Mr.Sharan Jagtiani, Sr. Advocate with Ms.Sushmita Gandhi,
Ms.Vatsala Pant, Ms.Sanaya Patel and Mr.Kushal Boolchandani i/
b Induslaw for the applicant.
Mr.Mayur Khandeparkar with Ms.Nidhi Singh, Mr.Brian
Noronha and Ms.Akshata Parkar i/b India Law LLP for
respondent nos.1, 2 and 3.
CORAM : BHARATI DANGRE, J.
RESERVED FOR ORDERS : 22nd DECEMBER, 2023 ORDER PRONOUNCED : 1st APRIL, 2024 P.C:-
1 ARF SV 1 Sàrl, (hereinafter referred to as 'ARF') a Company Incorporated in Luxembourg, has filed Commercial Execution Application No.28117/2023 against Bhatia Trading Co. LLC, (hereinafter referred to as 'the Company') having its Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 3/49 IAL 28351-23 ARF.doc office in Sharjah, United Arab Emirates (UAE), and also against one Suresh Tulsidas Bhatia and his son Rajeev Bhatia, residents of UAE, also having their presence in Mumbai, India, seeking execution of the final judgment and decree dated 29/11/2022 passed by the Sharjah Federal Court, Civil Court of Appeal, UAE, in the wake of it being recognized as a reciprocating territory for the purpose of Section 44A of the Code of Civil Procedure (for short 'the Code'), as per the notification issued by the Central Government on 17/1/2020.
2 The Execution Application has described 'ARF' as the judgment creditor/applicant/decree holder, whereas Bhatia Trading Co. LLC, Suresh Tulsidas Bhatia and Rajiv Suresh Bhatia are referred to as 'judgment debtors'/'respondents'.
In the column (G) of the Execution Application, the amount to be recovered against Judgment debtors is stated as below :-
(i) An amount of AED 115,793,092 along with interest @ 5% from the date of filing of the case i.e., 23 September 2020 till the date of actual realization of the monies.
(ii) Costs and expenses and an amount of AED 1000 as advocacy fees incurred by the Judgment Creditor;
Along with it, the fees and expenses and an amount of AED 1,000 as Advocacy fees incurred by the Judgment Creditor as awarded by the Final Court, is also claimed.
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Column (J) of the Execution Application has set out the manner in which the assistance of the Court is required and this includes passing of an order and directing the Judgment Debtors to disclose on oath, all properties, movable and immovable, including the Bank accounts in their name or in the name of the Directors, nominees, agents, etc, and attachment of immovable properties belonging to and/or in the possession of the respondents by issuing warrant of attachment under Order XXI Rule 54 of CPC.
The Schedule, a part of the Application has furnished details of the properties which are sought to be attached.
Appointment of Court Receiver is also prayed for, for obtaining the inventory of the movable and immovable assets and estate of the respondents, as may be disclosed with all the powers under Order XLI Rule 1 of the CPC.
3 During the pendency of the Execution Application, IA(L) No.28531/2023, is taken out by ARF praying for the following reliefs:-
(A) Order and direct the 1st to 3rd Respondents to jointly and severally furnish security for sums AED 115,793,092 along with interest @ 5% from the date of filing of the original case i.e., 23 September 2020 till the date of actual realization of the monies along with fees, and expenses and AED 1000 for Attorney's fees until the date of full settlement in favor of the Applicant within such time as may be directed by this Hon'ble Court, failing which this Hon'ble Court may be pleased to issue an order of injunction and attachment of the assets/properties belonging to the Respondents, whether the same be held in the name of the Respondents or by another person in trust for them or on their behalf, or for their benefit and pass such further or other orders as this Hon'ble Court may deem fit and proper in the circumstances of the case and thus render justice;
Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 5/49 IAL 28351-23 ARF.doc (B) Order and direct the 1st to 3rd Respondents to state on oath within such time as this Hon'ble Court deems fit, (i) full and complete details of assets (fixed assets and current assets including all moveable and immovable properties, tangible and intangible assets), current assets, receivables as on date of the Final Judgment, (ii) furnish copies of the Annual Returns filed before the Income Tax Authorities for the last 3 accounting years and also (iii) furnish a list of all the bank accounts with copies of the statement of accounts of the same for the last 2 accounting years;
(C) Order and direct the Respondents, either by themselves or through employees, servants, agents, and trustees, or any person acting through them or on their behalf or otherwise by an order of injunction, from in any manner selling, transferring, disposing of, or alienating or encumbering or pledging or mortgaging or hypothecating or charging or parting with possession of or inducting anyone else into or creating any right, title or interest or license in favour of anyone else in respect of the properties as set out in Schedule A to the Application and assets and estate of Respondents as may be disclosed on oath or as may be known to the Applicant during the pendency of these proceedings; (D) Pending the hearing and adjudication of the present Execution Application, this Hon'ble Court be pleased to issue a Warrant of Attachment under Order XXI, Rule 54 of the Code of Civil Procedure, 1908, against the Respondent Nos. 1 and 2, attaching the properties which are belonging to and/or in the possession of the Respondent Nos. 1 and 2 or any other person on their behalf and/or are held in their trust for their benefit, as, more particularly mentioned and described in Schedule A to the Application;
4 I have heard learned Senior counsel Mr.Sharan Jagtiani for the applicant, who is opposed by Mr.Mayur Khandeparkar, who has refused to recognize the applicant as the entity who can seek execution of the award, passed in favour of HSBC Bank and he has also raised several other objections.
Before I record the contention of the respective counsels are regards the reliefs sought in the Interim Application, it is necessary to highlight the background facts, in minimal words:
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(a) "Bhatia Trading Co. LLC, a Company has been availing credit facilities from HSBC Bank, Middle East Limited (hereinafter referred to as 'HSBC Bank') since 2003. The credit facilities were secured by personal guarantees of Suresh Tulsidas Bhatia and Rajiv Suresh Bhatia, the father and the son, and collectively, the Company along with the guarantors are referred to as 'borrowers'
(b) Under the Facility Offer letter dated 8th April 2019, HSBC Bank granted credit facilities to the Company, which stood amended by two amendment letters. The credit facilities, were in the form of withdrawal of overdrafts, letters of credit, term loans and import facilities.
(c) In 2019, the Company failed to repay the credit facilities due and payable to HSBC Bank, despite multiple demands, which resulted in a notice being issued to the Company demanding repayment of the sums due and payable under the facility agreement/credit facilities.
(d) By demand notice dated 11th February 2020, HSBC indicated to the borrower that the sum due under the facility agreement, as on issuance of the date of the letter has accumulated to AED 114,486,113 and the total outstanding with respect to the personal guarantees of AED 2,000,000. The borrowers were instructed to pay the debts within five days of receipt of the letter and the demand notice was issued without Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 7/49 IAL 28351-23 ARF.doc prejudice to the Bank availing the rights and remedies available to it in law. Simultaneously, notice was also issued to the individual borrowers, calling upon them to discharge their liability under the Facility Agreement/s.
(e) On 23rd September 2020, HSBC Bank initiated legal action by instituting Suit against the borrowers for recovery of the outstanding amounts before the Court of first instance in UAE. It sought directions to the Company to pay an amount due and payable along with interest @ 12%.
(f) On 14th June 2021, the Court of First Instance, UAE passed a judgment directing the Borrowers to collectively pay HSBC Bank an amount of AED 114,477,038.83 along with the interest at the rate of 5% from the date of the registration of the case until full payment and to pay costs, expenses, and AED 1000 for advocacy fees.
(g) HSBC Bank filed an Appeal against the First Order, bearing Appeal No. 1341 of 2021 inter alia seeking an increase in the amount ordered to be paid by the Borrowers, to AED 118,142,535. The respondent no.1 and the Company also challenged the order in Appeal.
By a common judgment dated 16th November 2021, the Court of Appeal, UAE rejected both appeals and upheld the First Order.
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(h) On 15th February 2022, by a common order, the Supreme
Federal Court, UAE dismissed the Appeal filed by respondent no.1 and respondent no.2, and partly allowed HSBC Bank's Appeal to reconsider certain claims.
(i) Respondent no.1 and no.2 filed an Appeal before the Civil Court of Appeal and by order dated 29th November 2022, respondent no.1 and 2 were directed to pay AED 115,793,092 (approximately INR 262,62,05,301/-) to HSBC Bank, under credit facilities along with 5% interest till realisation of the amount and this amount is approximated to INR 40,61,62,436/- till 27/10/2023.
5 An important development in the above scenario occurred on 9th September 2021, when HSBC Bank assigned the debts due from the borrowers to ARF, the plaintiff, by way of an Agreement dated 9/9/2021, captioned as 'Sale and Purchase Agreement Project - Zeus' (hereinafter referred to as 'SPA').
The plaintiff claiming to have stepped into the shoes of HSBC Bank has taken steps to execute the final judgment against the respondents in India, being the place of residence of the borrowers, since it anticipate that it would discover properties, against which it could realize its claims. The present Execution Application is premised on an assertion that the plaintiff is unaware of all the assets of the respondents, which may be located in India, and if the disclosure comes at their end, the plaintiff may Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 9/49 IAL 28351-23 ARF.doc be able to realise the final judgment and the decree against the properties of respondent nos.1 and 2, the borrowers in this country, and since UAE is a reciprocating territory, it is entitled to execute the decree passed by the Civil Court of Appeal in UAE.
6 Mr.Jagtiani, in support of the Execution Application and in particular, the relief sought in the Interim Application, has relied upon Section 44A of the Code, by submitting that a decree passed by the Civil Court of Appeal, UAE, as per the notification dated 17/1/2020 issued by the High Court of Law and Judiciary, (Department of Legal Affairs), is capable of being executed a decree passed in India, UAE being declared as reciprocating territory.
According to the learned Senior counsel, the final judgment fulfil the condition under Section 13 of the Code for it being recognised as conclusive, as it satisfy all the stipulations contemplated in clauses (a) to (f) of the said Section.
According to him, the legal proceedings initiated by HSBC Bank in Dubai were instituted before the Court of competent jurisdiction i.e. the Court of First Instance UAE, as the cause of action wholly arose there, as the respondents were residing/operating in UAE at the time of initiation of legal proceedings against them. Further, the decree held by ARF, has been passed on merits of the case, and the respondents were duly informed about the proceedings having been initiated, and with their participation.
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7 Pending the Execution Application filed by it, ARF
strongly suspect that the respondents may fraudulently alienate the properties owned by them and render the decree in its favour, a mere paper decree. It is specifically argued that the respondents, despite passing of the decree and having it challenged unsuccessfully, made no attempt to pay the amount under the decree, which lead to an inference that there is no intention to satisfy the decree and necessary steps are required to be taken by the plaintiff for its realization.
The Application has also pleaded about the malicious intent of the respondents to alienate the property, which is evident from the fact that on 23/6/2020, Suresh Bhatia fraudulently transferred his 50% share in valuable immovable property owned by him in India to his wife, after receiving a demand notice from HSBC on 11/2/2020.
Apart from this, reliance is placed by the plaintiff upon similar orders passed against the respondents in proceedings, initiated by other lenders, the details of which are set out in the application.
As per Mr.Jagtiani, the final judgment is enforceable and can lawfully be executed in India as on being complied with clauses (a) to (f) of the said section.
8 Opposing the Reliefs in the application, Mr.Mayur Khandeparkar representing respondent nos.1 to 3, at the outset, Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 11/49 IAL 28351-23 ARF.doc submit that ARF is not a decree holder, but it is an assignee of the decree holder and therefore, without obtaining leave under Order XXI Rule 16 of the CPC, it cannot maintain the application. Mr.Khandeparkar, has invited my attention to clause (c), providing that where an application for execution is made for execution of a decree filed under the provisions of Section 44A against the assignee or receiver in Insolvency, the Court executing the decree shall issue a notice to the person against whom the execution is applied for requiring him to show cause why decree should not be executed against him, and according to Mr.Khandeparkar, sub-section (2) of Rule 22 provide for an exception, i.e. on recording the reasons to that effect.
He would also place reliance upon Rule 316 of the Bombay High Court (OS) Rules, contemplating a notice under Order XXI Rule 22 of the CPC, in Form no.49, asking to show cause why the decree shall not be executed against the person and providing for consequences of omission to issue the notice.
9 Mr.Khandeparkar has raised a serious doubt about the assignment by HSBC Bank in its favour, by making an accusation that it is doubtful, since the original of it, is not available, and there is no digital signature upon the same. He would seriously contest the application by submitting that HSBC, the assignor continue to execute the decree in different proceedings and a statement come from him, that the creditors holds security beyond the decree in Dubai, but still the assignee comes here and Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 12/49 IAL 28351-23 ARF.doc seek execution. He raise a serious objection about one decree being executed at two places, and it is his contention that only decree holder can execute a decree and though Section 44A give benefit in execution of decree passed by Courts in reciprocating territory, this provision act as a funnel to verify, whether the person seeking execution is a decree holder, and to ascertain whether the assignment is true and real.
10 According to the learned counsel for the respondents, the alleged Assignment Form and Sale Purchase Agreement are not validly signed and hence, do not confer any rights, as the Assignment form and the Sale Purchase Agreement bear no evidence to show that decree dated 29/11/2022 has been assigned to the applicant. According to him, HSBC Bank pursued the claims for three rounds of Appeal in the Courts in UAE and even it has initiated execution proceedings, but never informed the Courts in UAE regarding any assignment, nor the applicant was ever impleaded in these proceedings.
One more objection raised by Mr.Khandeparkar is about the Assignment Agreement not being stamped, as it ought to have been stamped in terms of Article 5(h)(A)(iv) and this would amount to loss to the state ex-chequer if the proceedings on it are being initiated in State of Maharashtra. By relying upon Section 18 of the Maharashtra Stamp Act, 1958, according to him, since more than three months have lapsed from the document being brought into State, and no stamp duty having Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 13/49 IAL 28351-23 ARF.doc been paid, it cannot be acted upon. He would place reliance upon the decision of Justice G.S. Patel in case of Goldmines Telefilms Pvt Ltd Vs Achla Sabharwal AIR 2021 Bom 184.
11 Yet another submission of Mr.Khandeparkar is about the decree being passed in contravention of the Foreign Exchange Management (Guarantees) Regulation 2000, as Rule 3 thereof prohibits the person resident in India, from making a guarantee in respect of a debt owed by a person resident outside India without prior approval of RBI. It is contended by him that respondent no.1 and respondent no.2 had residences in India, when they made guarantees in respect of the debt allegedly owned by respondent no.3 Company to HSBC and therefore, the guarantees offered by them are not valid, considering that no permission of RBI was taken. Lastly, it is the submission of Mr.Khandeparkar that the applicant's prayer for disclosure of asset is not maintainable in the present case, as its locus in filing the present proceeding itself is under cloud and non-disclosure cannot be directed to be given to a third party, as according to him, the applicant ARF is a stranger to the dispute between HSBC Bank and the respondents.
12 It is the contention of Mr.Khandeparkar that the respondent nos.1 and 2 were never served with any notice that the alleged assignment of debt or the legal proceedings pending before the Courts in UAE. He would raise a contention that email ID "[email protected] was never accessible to Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 14/49 IAL 28351-23 ARF.doc respondent nos.1 and 3 and in any case, the Company had closed down its operations in the year 2021, and there is no basis to contend that email was addressed on the email ID of the Company. According to him, since the loan documents did not provide or contemplate any clause stipulating how a notice has to be served, the only valid address for issuance of notice is the one mentioned in the loan documents and therefore, there is no reason how an unaffirmed document purporting to be from ROC records, which reveal the email address of respondent no.3 as "[email protected]" is a valid address for issuance of notice. It is the submission of the respondents that the alleged Assignment Form and the Sale Purchase agreement dated 9/9/2021 are not purportedly signed and hence, not enforceable in law, and what is invoked is provisions of Information Technology Act, 2000, and the Information Technology (certifying authority) Rule 2000. According to Mr.Khandeparkar, electronic signatures/digital signatures are mandated to be issued by certifying authorities as per Section 35 of the Information Technology Act, and by relying upon Section 21 and 24 of the Information Technology Act, read with Rule 8 of the Certifying Authority Rules, he would submit that a Company whose equity shareholding is held in majority by Indian entities and/or individuals shall be permitted to apply for a licence to become a certifying authority in India and therefore, only such companies may be permitted to issue electronic signature certificate as per Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 15/49 IAL 28351-23 ARF.doc Section 35 and Section 5 of the Information Technology Act, provide for legal recognition of Electronic signatures. The applicant, according to Mr.Khandeparkar, shall be required to demonstrate that the DocuSign is a recognised Foreign certifying authority under the provisions of Indian Information Technology Laws, and until such proof is produced, a document purportedly signed using Docusign is not admissible, nor can it be regarded as a valid mode of execution of documents, and therefore, the Assignment Form and Sale Purchase Agreement are not validly executed documents as per the law enforced in India and cannot be relied upon.
Mr.Khandeparkar has also attempted to make a point that ARF can neither be regarded as a decree holder u/s.2(3) of CPC, and hence, it is not entitled to file application for execution under Order XXI Rule 10 of the CPC. According to him, both the Assignment Form and the Sale Purchase Agreement bear no evidence to show that the decree dated 29/11/2022 has been assigned to the applicant and the Assignment Form bear no assertion or recording of disputes pending between the respondents and HSBC in UAE as on date when it was allegedly signed/executed.
13 In order to dispel the doubt expressed by Mr.Khandeparkar about execution of the assignment, Mr.Jagtiani has placed on record a redacted copy of the Sale and Purchase Agreement (SPA) dated 9/9/2021 along with the affidavit in Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 16/49 IAL 28351-23 ARF.doc rejoinder filed on 6/12/2023 entered between ARF SR 1 and HSBC Bank, Middle East and he has also placed before me an unredacted copy of the Sale.
The agreement is signed by Christine Lynch for and on behalf of HSBC Bank. Overleaf the agreement, is the signature of Gael Castex, for and on behalf of ARF, which is docusigned with an assigned registration number and Claudia Nazare has also docusigned the said document with an assigned number.
When the said agreement is produced before me, the argument of Mr.Khandeparkar that the document do not exist, fall to its ground. The document bears the signature of the authorized person representing HSBC Bank and ARF, and I do not think there is any scope for doubting it by a third party, as neither of the signatories has raised any objection as to its execution.
Docusign is a secure e-signature, usually applied as a document signing software replacing the manual signing process and it is a well legal recognized mode of electronic signatures in India, covered within the provisions of the Information Technology Act, 2000, as well as under the Electronic Signature or Electronic Authentic and Procedure Rules 2015. The docusign electronic signature solution is widely accepted electronic signature under Electronic Signature in Global and National commerce (ESIGN) Act and the Uniform Electronic Transactions Act (UETA).
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Undoubtedly, there are various alternatives to docusign, each tailored to specific business sizes, uses and industries, which may include adobe sign, juro, sign now, etc. Since docusign is accepted to meet the stringent security requirements, it is widely accepted in the technological era as an easy mode of preparing agreements using the existing documents and forms in virtually any file type.
The objection of Mr.Khandeparkar, expressing doubt over the docusigned document on specious ground that applicant must show that it is a recognised certifying Authority under I.T laws in India, is of no relevance as the document is executed in UAE and in any case, the validity of the Assignment Deed is not for me to determine, in these proceedings.
14 Reading of the SPA will further dispel the contention of Mr.Khandeparkar, about the rights and entitlement of ARF to seek execution of the judgment and decree passed by the UAE Court, against the borrowers in the proceedings initiated by the HSBC Bank before the Court of first instance, UAE and affirmed by the higher Court, seeking repayment of the amount under the facility letters along with the interest.
The agreement had referred HSBC Bank as the 'Seller' and ARF, incorporated and registered in Luxemborg as the 'Buyer'. The background of the agreement is set out as under:-
Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 18/49 IAL 28351-23 ARF.doc (A) The Seller granted Loans to the Borrowers pursuant to the Loan Documents. The Borrowers defaulted on their respective payment obligations under the Loan Documents and the Seller initiated legal action against some of the Borrowers and Guarantors. (B) The Buyer wishes to purchase such title, right and interest as the Seller may be have in the Loans and the Loan Documents, on the terms and conditions set out below.
(C) The Seller has agreed to sell such right, title and interest as it may have in the Loans, Loan Documents and related court proceedings to the Buyer on the terms and conditions set out below.
15 The Agreement has identified the borrower as a person in Schedule-I and some of the important terms which are defined in the agreement, read thus :-
"Debt' any present or future liability actual or contingent payable or owing by the borrowers to the Seller under or in connection with the Loan Documents.
Existing Claim The recovery process, whether in the form of litigation arbitration or otherwise, that has been initiated prior to Completion in relation to a Loan as more particularly set out in Schedule 1.
Guarantee any guarantee, indemnity or other obligation or assurance of any kind in respect of the obligations of a Borrower to the Seller under or in connection with a Facility Agreement;
Guarantor a person that has provided a Guarantee; Loan Portfolio All the loans identified in Schedule 1 and all Loan Documents and all Recovery Claims; Reputational Claim Means a claim or intimation of a claim or circumstance which is likely to have adverse reputational implications for the Seller or a member of the Seller's Group;
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16 Under the agreement, the Seller i.e. HSBC had agreed
to sell such right, title and interest, if any, as it may have in the loan portfolio, which the Buyer has agreed to purchase with effect from the completion date.
The loan portfolio of the Debtor Company is set out in Schedule 1 as below:-
Bhatia AED AED 114,477.038.83 Sharjah Court of Trading Co. 171,687,500.00 with 5% annual First Instance case interest calculated number 5249/2020, from 23/9/2020 plus judgment dated 14 court expenses and June 2022.
AED 1,000 in legal fees.
17 Clause 2.3 of the Agreement entitle the Buyer i.e. ARF to all the rights and benefits arising under the loan documents, the loans and all ancillary rights relating thereto, including without limitation any recovery claim as well as all accrued and unpaid interest, yet excluding any amount that may be paid pursuant to insurance claim.
The agreement further provide that any payment relating to, or connected with the loan portfolio that is received by the Seller on or after the completion date, shall be notified to and paid to the Buyer promptly on receipt and shall be held in trust by the Seller for the benefit of the Buyer pending such payment. The Seller waive any right to claim from the Buyer any Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 20/49 IAL 28351-23 ARF.doc accrued or unpaid interest arising from or in connection with the loan portfolio that is paid on or after the completion date.
The contract contemplated that at completion, the Seller shall comply with the obligations and subject to the Seller having complied with its obligations, the Buyer shall pay the purchase price as agreed and deliver to the Seller duly executed counter parts of agreements/assignments, notices and other documents referred to in para-1 of Schedule II.
On the completion, the agreement contemplated the Buyer and Seller to comply with their respective obligations.
18 The most relevant feature of the agreement is the conduct of claims and Clause no.5 provide for the same as below:-
5. CONDUCT OF CLAIMS 5.1. The Buyer will at Completion become entitled to pursue the Existing Claims and to initiate new recovery actions (whether ancillary to the Existing Claims or otherwise) (New Claims, and together with the Existing Claims, Recovery Claims).
5.2. Notwithstanding any other provisions in this agreement the Seller shall be permitted to defend a Reputational Claim or issue proceedings as a consequence of the issuance of a Reputational Claim being made without the consent of the Buyer, provided that the Seller notifies the Buyer that it wishes to or has defended a Reputational Claim and/or it has or wishes to issue proceedings in respect of a Reputational Claim as soon as reasonable practicable.
5.3. Save for a Reputational Claim the Seller shall not take any action in relation to a Recovery Claim on or after the Completion Date without the prior written approval from the buyer.
5.4. The Buyer shall be under an obligation to commence any New Claim in its own name where it is possible for nit to do so and further to procure in relation to an Existing Claim where it Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 21/49 IAL 28351-23 ARF.doc is possible for it to do so that the buyer is substituted for the Seller as the relevant party to the proceedings.
5.5. In the event that the Seller is unable to replace the Seller with the Buyer as the party of a record in respect of an Existing Claim, or if the Buyer is precluded from commencing a New Claim due to a requirement that the Seller must be a party to a New Claim, the Seller agrees for the period of 5(five) years from the Completion Date to remain a party in each such Existing Claim and/or become a party to each such New Claim (as the case may be) on the following terms:
5.5.1 Subject to clause 11.1, all costs, claims, expenses, demands, counterclaims and adverse judgments (together, Claims and Expenses) incurred on or after Completion that arise from or relate to pursuing a Recovery Claim shall be borne by the Buyer, who shall indemnify the Seller in respect of all Claims and Expenses, save that:
(a) Subject to clause 5.5.1(b), the Seller shall be liable for any Claims and Expenses incurred as a result of the Seller taking action on or after Completion without first obtaining the Buyer's written authorisation; and
b) The Buyer shall indemnify the Seller for Reputational Claims subject to (i) a maximum indemnity liability of USD 100,000 (one hundred thousand United States Dollars) for each Reputational Claim, and (ii) an aggregate maximum liability of USD 300,000 (three hundred thousand United States Dollars) for all Reputational Claims;
5.5.2 The Buyer covenants that it will not commence New Claims where, for procedural reasons, such process is required to be commenced in the name of the Seller without having first obtained the prior written consent of the Seller, which consent shall not be unreasonably withheld or delayed;
5.5.3 The Buyer covenants that it will not commence any criminal proceedings in relation to any of the Loans without having first obtained the prior written consent of the Seller, which consent shall not be unreasonably withheld or delayed. For the avoidance of doubt, where the Seller in its reasonable opinion considers that the filing of criminal proceedings may or is likely to result in a Reputational Claim, a refusal to consent to the Buyer initiating criminal proceedings shall not be deemed to be unreasonable; and 5.5.4 The Seller shall cooperate with the Buyer in the latter's pursuit and conduct of Recovery Claims and shall, at the Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 22/49 IAL 28351-23 ARF.doc Buyer's expense:
(a) execute all such documents and take all such reasonable actions as required for the Buyer acting reasonably to (i) represent the Seller in the Recovery Claims, including without limitations powers of attorney, instructions to counsel and court documents and (ii) act on the Seller's behalf in connections with the Recovery Claims, including without limitation by instructing counsel on behalf of the Seller; and
(b) provide the Buyer with any such information, documentation, evidence, knowledge or other resource that is in the Seller's possession or control and that is material to a Recovery Claim provided that the provision of such information, documentation, knowledge or other resource is not precluded whether by reason of privilege or otherwise.
19 The agreement has also incorporated a clause of confidentiality, providing that each party undertake to the other that it shall maintain confidentiality of the terms of the agreement and a specific clause to that effect was stipulated in Clause no.14.
Clause No.15 of the SPA provide for assignment, allowing the Buyer to assign, mortgage, charge, sub-contract, delegate, declare a trust over or deal in any manner, with any of all of its rights and obligations under the agreement to any members of the Buyer's group in future, though hedged with certain conditions set out therein.
20 SPA along with the documents referred to in it, constituted the 'entire agreement' between the parties in relation to the transaction and it superceded any previous arrangement between the parties in respect of the same.
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The Agreement is accompanied with Schedule-I which listed the loan portfolio, whereas Schedule II provided for completion whereas Schedule III set out the mutual warranties as well as the Sellers's warranties.
Schedule II is divided in two parts; Part 1 dealing with completion deliverables and Part 2 providing for actions and obligations after completion. Part 1 read thus :-
Part 1 Completion deliverables
1 The Seller hereby unconditionally, irrevocably and
absolutely assigns to the Buyer all of the Seller's legal and beneficial rights, title, interest and benefits (if any) as the Seller has in and to the Loan Portfolio, including without limitation. 1.1 each Loan;
1.2 the Debt, 1.3 each Facility Agreements;
1.4 each Security;
1.5 each Guarantee; and 1.6 each Existing Claims, with effect from the Completion Date and the Seller shall deliver duly executed assignments and noticed of assignments in the forms attached as Appendix 1 and other documents in the form as the Seller may determine, to effect such assignments.
1.7 The Seller shall deliver, or produce delivery, to the Buyer of or make available to the Buyer the original or a duly certified copy of any power of attorney under which this agreement or any document to be delivered to the Buyer under this agreement has been executed.
21 The above clause is widely worded to indicate that HSBC Bank had assigned to ARF all of its legal and beneficial rights, title, interest and benefits which it has in and to the loan portfolio, including each loan, debt, each facility agreement, each Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 24/49 IAL 28351-23 ARF.doc security and guarantee, along with each existing claims with effect from the completion date.
Para 2 has set out the following obligations on part of the Seller.
Actions and obligations after Completion 1 The Seller shall, to the extent possible, transfer each Existing Claim to the Buyer and replace the Seller with the Buyer as the party of record in each Existing Claim, and shall for each Existing Claim deliver a written confirmation from the competent court presiding over the relevant Existing Claim evidencing such transfer and replacement. 2 To the extent that the Seller is unable to effect the transfer contemplated by paragraph 1 of Part 2 of this Schedule 2, the Seller shall comply with clause 5 of this Agreement and paragraphs 3 and 4 of Part 2 of this Schedule 2."
22 Appendix 1 of the Agreement comprise of an assignment form and even it make the intention of the parties evident.
The Assignor, HSBC Bank, the Lender under the facility agreement/s with the Borrowers and Guarantors, has agreed to sell such legal and beneficial right, title and interest, as it may have in the debt and the facility agreement, the security and each guarantee to the assignee on the terms and conditions set out therein, and the term 'debt' was intended to cover any present or future liability (actual or contingent) or payable or owing by the Borrower to the Assignor under or in connection with the Facility Agreement and the Security.
23 The Assignment Clause in the Agreement clearly stipulated as under:-
Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 25/49 IAL 28351-23 ARF.doc "Assignment of rights The Assignor unconditionally, irrevocably and absolutely assigns to the Assignee all the Assignor's rights, title, interest and benefits in and to; 2.1.1 the Debt;
2.1.2 the Facility Agreement;
2.1.3 the Security; and 2.1.4 each Guarantee with effect from (DATE)"
The Assignee's acceptance is also covered in the Assignment, form by providing that "the assignee agrees that it shall accept the assignment referred to clause no.21".
24 A meaningful reading of the SPA with all the clauses being carefully crafted make it evidently clear that ARF, as the Buyer intended to purchase the right, title and interest of HSBC Bank in the loans and loan documents and HSBC, the Seller agreed to sell its right, title and interest, as it may have in the loans, loan documents and related court proceedings to the Buyer on the terms and conditions set out therein.
The assignment is wide enough to cover 'Debt', which was understood to cover not only any present but also a future liability payable or owing by the borrowers to the lender, under or in connection with the loan documents. The Assignment Form specified that the Assignor has unconditionally, irrevocably and absolutely assigned to the Assignee all its rights, title, interest and benefits in and to the debt, the facility Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 26/49 IAL 28351-23 ARF.doc agreement, the security and each guarantee with effect from the completion date i.e. the date of the agreement. The agreement titled as 'Sale and Purchase Agreement' also set out the purchase price to be paid by the Buyer to the Seller on completion in dollars, by electronic transfer.
The understanding between the parties as regards the claims in paragraph no.5 clearly conferred a right upon ARF to pursue the existing claims and to initiate new recovery actions though HSBC retained the right to defend the reputational claim, and there is also a clarity to the effect that save for a reputational claim, HSBC shall not take any action in relation to recovery of claim, on or after completion date without prior approval of ARF.
25 In the contractual bargain, it was agreed that, even where the Seller HSBC is unable to replace the Buyer, as a party on record in respect of an existing claim or if the Buyer ARF is precluded from commencing a new claim, due to a requirement that the Seller must be a party to it, it is agreed by HSBC Bank that for a period of five years from the completion date, it shall remain party in such existing claim and/or become a party in a new claim, subject to the stipulation that all costs, claims, expenses, demands and adverse judgments incurred on or after completion, shall be borne by the Buyer i.e. ARF, who shall indemnify HSBC in respect of all claims and expenses, except the one contemplated in Clause 5.1.1.
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26 The understanding between the Seller HSBC Bank
and the Buyer ARF is limpid and comprehensible, even to a third party. HSBC Bank has unconditionally, irrevocably and absolutely assigned all the benefits rights, title interest and benefits, arising out of the loans granted to the respondent under the Assignment Agreement dated 9/9/2021 in favour of the present applicant, ARF. The assignment, including assignment of loans and debts of the respondents from HSBC Bank to the applicant along with all the rights and remedies of the transferor which we include the right to prosecute the claim to a judgment in a Court of law, and then vest in the transferee, upon execution of the assignment.
In case of transfer of debts or an actionable claim, it necessarily shall result in transfer of the transferors right in a decree, which may be passed in favour of the pending litigation and the moment decree is passed in their favour by the Court of Law, it is also automatically transferred in favour of the transferee by virtue of the assignment.
27 ARF, being the assignee of HSBC Bank, in that capacity and in the wake of the specific stipulations in the Sale Purchase Agreement, is also entitled to initiate the execution application. The terms of the Assignment Agreement clearly reflect that, as a Buyer ARF is entitled to pursue the existing claims of HSBC Bank and even initiate new proceedings in respect of debts transferred to it. As per the definition of existing Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 28/49 IAL 28351-23 ARF.doc claims, read with Clause 5.1 of the SPA, the applicant is entitled to continue the existing claims already initiated by HSBC and not only this, it is even empowered to initiate new action against the borrowers/respondents.
Although HSBC had initiated the proceedings in form of a Suit filed before the Court in UAE, seeking orders to pay the amount under the facility letters and to obtain a decree, which is upheld by the Higher Courts in UAE, the applicant in the wake of the assignment in its favour is entitled to pursue the claim in execution in the Courts in India by filing the Execution Application as the Assignment Agreement provided that the applicant as an assignee of HSBC Banks is entitled to pursue the proceedings and in certain cases, HSBC Bank is entitled to continue its existing claims against the respondents, but it shall be for the benefit of the ARF, as it is the ultimate beneficiary of the debts. ARF, for all purposes, in its capacity as the Assignee of debts is the beneficial owner of the decree passed in favour of the Bank, even though it is pursuing the claims or execution proceedings in UAE, which is only in the interest and benefit of the applicant, since all its rights, title and interest are already transferred in favour of ARF through the Assignment Agreement.
Therefore, the objection of Mr.Khandeparkar that the present application is not maintainable at the instance of the applicant, is not worthy of consideration.
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28 Another argument of Mr.Khandeparkar that there is a
common decree which is being executed at two places, must also meet the same fate, as there is no prohibition in having two proceedings.
Delhi High Court in Oakwell Engineering Ltd Vs. Enernorth Industries INC, while dealing with Section 44A of the Code, where a decree holder obtained decree and sought execution at Singapore Court, concluded that when the decree was brought before it for execution, the High Court was well within its powers to entertain the Execution Petition. The relevant observation of the learned Single Judge reads thus:-
"Coming to the last objection regarding the abuse of the process of the Court, it is submitted that the decree holder has already proceeded against the judgment debtor in the Court in Ontario and, therefore, proceedings against the judgment debtor in the High Court of Delhi is an abuse of the process of the Court. It is contended that the judgment debtor will be harassed if he has to simultaneously face execution proceedings in ten different countries and that this certainly was not the object of Section 44A of the Code. It is further contended that the decree holder obtained an interim relief from the superior court of Ontario on 20.1.2005 freezing the proceeds from the sale of M and M Engineering and thereafter on 28.1.2005 the decree holder and the judgment debtor entered into a settlement which was approved of by the court of Canada on 22.2.2005. According to the judgment debtor the decree holder having already obtained the interim relief and having entered into a settlement, cannot now approach this Court for execution of the same decree. The conspicuous fact in this connection is that the judgment debtor does not say that any part of the decree in execution before this Court has been realised by the decree holder.
Another decision in case of Karnail Singh Sandhar Vs. Sandhar and Kang Limited, 2010 SCC Online P & H Court, a similar issue arose for consideration and relying upon Oakwell Engineering (supra), the following observation is recorded :
Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 30/49 IAL 28351-23 ARF.doc "36 A somewhat similar dispute had arisen before the Allahabad High Court in the wherein the objection was raised that in view of Order 21 case of Om Parkash (supra) Rules 11(2) Clause (0 of CPC, the decree holder has to mention in the execution application as to whether any, and (if any) what, previous applications have been made for the execution of the decree, the, dates of such applications and their results to mean that so long as one execution application has not been finally disposed of no second execution application can be filed as a result of which this provision of the CPC operate as a bar to the presentation of a second execution application during the pendency of the first execution application. While interpreting the aforesaid Order 21 Rule 11(2) Clause (f) of the CPC, the Division Bench of the Allahabad High Court has held as under:-
"3. There is nothing in the Code of Civil Procedure or in any other law which lays down positively that several applications for execution of a decree cannot be filed simultaneously and it appears to us that unless such a right to apply for execution of a decree in any of the modes permissible by law is not definitely restricted such a bar should not be inferred from the requirements of the contents of an application for execution. The bar to a certain legal right should be clearly laid down by statute and is not to be inferred. In a case where it is to be inferred there should be no other conclusion possible except the conclusion that the other provisions necessarily imply that such a bar should come in existence. There is nothing in the provisions of Order 21 Rule 11(2), Clause (f) to lead to such an inference."
29 The principle transaction between the Bhatia's and HSBC took place in UAE, and it is the Court of Competent jurisdiction in UAE which passed a final decree in favour of HSBC. ARF became the assignee on 9/9/2021, in the mid-way of the proceedings instituted by HSBC Bank for recovery of its due under the Facility letters and this was precisely at the stage of pendency of the Appeal against the first order passed by the UAE Court on 14/6/2021. After the Assignment Deed dated 9/9/2021, the judgment dated 14/6/2021 passed by the Court of first instance in UAE was assailed by the Bank as well as by the respondents in an Appeal, which was rejected on 16/11/2021. Once again, the challenge was raised by HSBC Bank as well as by Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 31/49 IAL 28351-23 ARF.doc respondent nos.1 and 2 and the Supreme Federal Court, UAE dismissed the Appeal of the respondents, though it partly allowed the HSBC Bank's Appeal to reconsider certain claims. Another Appeal was filed before the Civil Court of Appeal, which put an end to the proceedings on 29/11/2022 when it revised the decretal amount payable to the HSBC Bank.
Despite the assignment in favour of the applicant by the Assignment Agreement dated 9/9/2021, the proceedings before the UAE Courts were continued by HSBC Bank and it secured the final judgment on 29/11/2022 in its favour. Throughout the proceedings, the personal guarantors i.e. respondent nos.1 and 2 appeared and raised several defences and in fact, they had raised challenge to the judgment of the First Court, but remained unsuccessful.
As per Clause no.2.4 of the Assignment Deed, ARF is entitled to everything that is conveyed to HSBC, even after the assignment and Clause 2.4 clearly, stipulate that any payment relating to, or connected with the loan portfolio that is received by the Seller Bank on or after completion date, shall be paid to ARF promptly on its receipt and it shall be held in trust for the benefit of the Buyer, pending such payment. Therefore, Mr.Jagtiani is right when he submit that even if HSBC had executed the decree in UAE, the amount received therein ought to have come to the applicant ARF, under the Assignment as per the understanding was, the moment HSBC receives any money Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 32/49 IAL 28351-23 ARF.doc from the borrower, it shall be conveyed to the Assignee as the debt/security/guarantee is assigned in its favour and 'debt' covered anything payable or owing by the borrower to the Assignor under or in connection with the facility agreement and also the security. Apart from this, the Guarantee is also assigned in favour of ARF and the guarantee indicate any guarantee, indemnity or other obligation or assurance of any kind, in respect of obligations of the borrower to the Assignor, under the facility agreement.
When the debt is purchased by the applicant and it is assigned in its favour, it cannot be argued that an execution application for its recovery cannot be brought by the assignee. If the borrowers has to discharge the debt and the liability under the facility agreement, they definitely cannot be entitled for a leverage by calling in question as to who is recovering the debt, when HSBC has never questioned the assignment in favour of ARF. In the wake of the understanding between HSBC and the applicant, as assignor and assignee, the applicant is perfectly within its power to file an application seeking execution in relation to the properties of the borrowers in India.
30 The Execution Application filed by ARF seek disclosure of the immovable and movable properties of the respondents and their Directors, nominees, agents etc. Respondent no.1 and 2 were not residents of India when they signed the personal guarantee on 16/5/2018 and UAE Courts held them liable in their capacity as guarantors under Article 72 Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 33/49 IAL 28351-23 ARF.doc of the Federal Law No.18 of 1993 concerning the commercial transactions in the order dated 14/6/2021.
Upon objection that the execution proceedings are being prosecuted by HSBC in UAE, Mr.Jagtiani has made a specific statement that the original decree holder HSBC Bank had closed its execution proceedings before the UAE Courts as on 19/1/2024. It is also clarified that no amount could be realised in the execution proceedings towards satisfaction of the judgment /decree in its favour.
Now, the only remedy available to the assignee is to prosecute the execution application filed by it, in this Court, which in my considered opinion, is perfectly maintainable.
Ultimately, the applicant shall be entitled to get what HSBC Bank was entitled to, in terms of judgment and decree and nothing more than it.
31 Now, I shall deal with the argument of Mr. Khandeparkar that the Assignment Agreement never contemplated assignment of the decree in favour of the applicant, ARF.
The Assignment Agreement between HSBC and the ARF clearly reveal that there was transfer of debts in favour of the Buyer which, necessarily involved transfer of its rights in a decree which may have been passed in its favour in the future. The debt owned by the Bhatias to HSBC was the subject matter of Suit Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 34/49 IAL 28351-23 ARF.doc filed in the Court at UAE, which has resulted into a decree and when the Assignment clearly transferred the debts owing to HSBC, which covered both present and future liability payable or owing by the borrowers, in connection with the loan documents, merely because the assignment of rights took place during the pendency of the proceedings initiated by HSBC against the respondents, is no ground to convey that, at the time when HSBC assigned the debts to the applicant, there was no decree. By virtue of the assignment deed, not only the debt, but the right to realise the debt, is also transferred in favour of the applicant and it is even entitled to the decree arising from the proceedings in relation to such debt. In fact, the applicant has stepped into the shoes of HSBC Bank for all purposes relating to recovery of debt owed to it under the Facility Agreements and it is therefore, even entitled for the decree under the Assignment Agreement. 32 Section 2 of the Code of Civil Procedure has defined the term 'decree' to mean formal expression of an adjudication, conclusively determining the rights of the parties in the Suit and 'decree holder' is defined as a person in whose favour a decree has been passed or an order capable of execution has been made.
Under Order XXI Rule 10 of the Code, it is the holder of a decree, who is entitled to seek its execution by applying to the Court which has passed a decree, or to the Officer appointed in his behalf, or to such Court or to the proper Officer thereof, if the decree has been sent to another Court. Since the Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 35/49 IAL 28351-23 ARF.doc applicant, ARF is the assignee of the final order and the decree, by virtue of the Assignment Agreement, it is a 'transferee of a decree' under Section 49 of the Code, which provide as under :-
"Every transfer of a decree shall hold the same subject to the equities (if any) which the judgment debtor might have enforced against the original decree holder".
By virtue of the aforesaid, a transferee or an assignee is also a 'decree holder' in terms of the Code of Civil Procedure. Order XXI Rule 16 provide for execution of a decree by the transferee, and it permit an application by an assignee, to whom the interest of any decree holder is transferred in writing, or by operation of law.
The explanation appended to Order XXI Rule 16 inserted by Act 104 of 1976, provide that nothing in the Rule shall affect the provisions of Section 146 and the transfer of rights in the property, which is the subject matter of the Suit, may apply for execution of decree without separate assignment of the decree as required by law.
The above explanation has offered the needed clarification that a person, who does not have a written assignment of decree, but who has succeeded to a decree holder's right, step into the shoes of a decree holder u/s.146 of the Code of Civil Procedure.
Section 146 is a provision for the proceedings to be taken or application made by or against any person, and it reads to the following effect:-
Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 36/49 IAL 28351-23 ARF.doc "146 Proceedings by or against representatives - Save as otherwise provided by this Code or by any law for the time being in force, where any proceeding may be taken or application made by or against any person, then the proceeding may be taken or the application may be made by or against any person claiming under him."
33 The Assignment Agreement in the present case, in favour of the applicant is clear and recognizes ARF as the assignee of debts and would be covered under Order XXI Rule 16. In any case, even the applicant is an assignee under the principle of equities, since it has been assigned a debt along with all rights, title, interest and benefits arising therefrom and is therefore, competent enough to pursue the proceedings under Section 146 of the Code, as a person claiming under and through HSBC, the assignor.
34 The position of law on this aspect is to be clearly found in a decision on which both the sides have placed reliance.
In Jugalkishore Saraf Vs. Raw Cotton Co. Ltd ,1 while interpreting the provision in form of Order XXI Rule 16, being juxta posed against Section 146 of the Code, the question arose whether in the wake of the provision in Order XXI Rule 16 providing for application by the transferee of a decree, is eligible to apply under Section 146 of the Code.
The aforesaid question arose in the background facts that two individuals carried on business as 'merchants' and 'pakka 1 AIR 1955 SC 376 Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 37/49 IAL 28351-23 ARF.doc adatias in bullion and cotton' at Bombay in the name and style of 'Habib and Sons'. In 1948, the firm instituted a Summary Suit in Bombay City Civil Court against Jugalkishore Saraf for recovery of an amount in respect of certain transactions in gold and silver effected by the firm.
While the Suit was pending, in 7/2/1949, a document was executed, where it was agreed that the two partners would transfer and M/s.Raw Cotton Co. Ltd would accept the transfer of, inter alia all books and other debts due to them, in connection with their business in Bombay and full benefit of all securities for the debts and all other property to which they were entitled in connection with the said business.
Raw Cotton Company did not take any steps under Order XXII Rule 10 of CPC to get themselves substituted as plaintiffs and instead Habib and Sons, continued the Suit. A decree was passed on 15/12/1949 aggregating to sum of Rs.8428- 7-0 and for further interest at 4% per annum from the date of the decree until payment.
On 25/4/1951, Raw Cotton Company filed an application for execution, under Order XXI Rule 11, and sought a declaration that the applicants are the assignees of the decree as the decretal debt along with other debts has been transferred by the plaintiffs by Deed of Assignment dated 7/2/1949 which was confirmed by custodian of evacuee property, Bombay and hence, it should be substituted for the plaintiffs.
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On 10/5/1951, the City Civil Court issued notice under Order XXI Rule 16 to Habib and Sons, decree holders on record and Jugalkishore Saraf, the defendant judgment debtor, requiring them to show cause why decree passed in the Suit in favour of the plaintiffs and transferred to the respondent Company, should not be executed against the judgment debtor.
The judgment debtor denied that the documents in question had been executed or that it transferred the decree to the respondent Company.
It is in these background facts, the two provisions were pressed into service.
35 In paragraph no.39, Justice S.R. Das (as his Lordship then was) concluded that the document under consideration did not transfer the future decree and therefore, equitable principle did not apply and therefore, the respondent company did not become a transferee of the decree within the meaning of Order XXI Rule 16. However, it was held that the respondent Company is entitled u/s.146 to make application for execution, along which the original decree holders would do and this conclusion was supported by the following reasoning:-
"39 "I have already held that the document under consideration did not transfer the future decree and, therefore, the equitable principle did not apply and, therefore, the respondent Company did not become a transferee of the decree within the meaning of Order 21 Rule 16. What, then, was the legal position of the respondent Company? They had undoubtedly, by the document of 7th February, 1949, obtained a transfer of the debt which was the subject-matter of the then pending suit. This transfer, under the Transfer of Property Act, carried all the legal incidents and the remedies in relation Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 39/49 IAL 28351-23 ARF.doc to that debt. The transferors has no longer any right, title or interest in the subject-matter of the suit. After the transfer it was the respondent company which had the right to continue the suit and obtain a decree if the debt was really outstanding. They, however, did not bring themselves on the record as the plaintiffs in the place and stead of the transferors but allowed the latter to proceed with the suit. The transferors, therefore, proceeded with the suit although they had no longer any interest in the debt which was the subject matter of the suit and which had been transferred by them to the respondent Company. In the premises, in the eye of the law, the position of the transferors, vis-a-vis the respondent company, was nothing more than that of benamidars for the respondent company and when the decree was passed for the recovery of that debt it was the respondent company who were the real owners of the decree. As between the respondent company and the transferors the former may well claim a declaration of their title. Here there is no question of transfer of the decree by the transferors to the respondent company by assignment of the decree in writing or by operation of law and the respondent company cannot apply for execution of the decree under Order 21 rule 16. But the respondent company are, nonetheless, the real owners of the decree because it is passed in relation to and for the recovery of the debt which undoubtedly they acquired by transfer by the document under consideration. The respondent company were after the transfer, the owners of the debt which was the subject matter of the suit and the legal incidents thereof and consequently were the real owners of the decree. The respondent company derived their title to the debt by transfer from the transferors and claimed the same under the latter. When the respondent company be,came the owner of the decree immediately on its passing they must, in relation to the decree, be also regarded as persons claiming under the transferors. The respondent company would not have become the owner of the decree unless they were the owners of the debt and if they claimed the debt under the transferors they must also claim the relative decree under the transferors as accretions, as it were, to their original right as transferees of the debt. In my opinion, the respondent company are entitled under section 146 to make the application for execution which the original decree- holders could do.
36 Justice N.H. Bhagwati reasoned his opinion by the following remarks:-
"49. The transfer contemplated under this rule is either by assignment in writing or by operation of law. It was not contended by the Appellant at any stage of the proceedings that there was in this case a transfer by operation of law or that the agreement dated the 7th February 1949 was not an assignment of all the rights which Habib & Sons had in connection with the Indian business. The question therefore that falls to be considered is whether the deed of assignment dated the 7th February 1949 operates as a transfer of the decree by assignment in writing within the meaning of Order XXI, rule 16 of the Code of Civil Procedure.
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53. Order XXI, rule 16 of the Code of Civil Procedure is a statutory provision for execution by the transferee of a decree and unless and until a person applying for execution establishes his title as the transferee of a decree he cannot claim the benefit of that provision. He may establish his title by proving that he is a transferee of a decree by assignment in writing or by operation of law. Section 5 of the Transfer of Property Act defines a "transfer of property" as an act by which the transferor conveys property in present or in future to the transferee or transferees. A transfer of a decree by assignment in writing may be effected by conveying the decree in present or in future to the transferee. But even for the transfer to operate in future the decree which is the subject matter of the transfer must be in existence at the date of the transfer. The words "in present or in future" qualify the word "conveys" and not the word "property" in the section and it has been held that a transfer of property that is not in existence operates as a contract to be performed in the future which may be specifically enforced as soon as the property comes into existence.
It is only by the operation of the equitable principle that as soon as the property comes into existence and is capable of being identified, equity taking as done that which ought to be done fastens upon the property and the contract to assign thus becomes a complete equitable assignment. In the case of a decree to be passed in the future therefore there could be no assignment of the decree unless and until the decree was passed and the agreement to assign fastened on the decree and thus became a complete equitable assignment. The decree not being in existence at the date of the transfer cannot be said to have been transferred by the assignment in writing and the matter resting merely in a contract to be performed in the future which may be specifically enforced as soon as the decree was passed there would be no transfer automatically in favour of the "transferee" of the decree when passed. It would require a further act on the part of the "transferor" to completely effectuate the transfer and if he did not do so the only remedy of the "transferee" would-be to sue for specific performance of the contract to transfer. There would therefore be no legal transfer or assignment of the decree to be passed in future by virtue of the assignment in writing executed before the decree came into existence and the only way in which the transferee could claim that the decree was transferred to him by assignment in writing would be by the operation of the equitable principle above enunciated and the contract to assign having become a complete equitable assignment of the decree."
37 The aforesaid decision has clarified the position of law as to whether it is necessary to import the equitable principle while construing the statutory provision enacted in Order XXI Rule 16, as the Code do not prescribe any mode in which an assignment in writing has got to be executed in order to effectuate Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 41/49 IAL 28351-23 ARF.doc the transfer of decree as the only statutory provision in regard to assignment found in Chapter VIII Of the Transfer of Property Act, which relate to transfer of actionable claim which is defined in Section 3 of the Act as "a claim to any debt or to any beneficial interest in movable property not in possession of the claimant, which the Civil Court recognizes as affording ground for leave.
A judgment debt or decree is not an actionable claim for no action is necessary to realise it, as it has already been subject of an action and is secured by a decree. A decree to be passed in future is also not an actionable claim and an assignment or transfer thereof, need not be effected in the manner prescribed u/s.130 of Transfer of Property Act. The assignment in writing or the decree to be passed would itself result in a contract to assign, which contract would become a complete equitable assignment on the decree being passed and would fulfil the requirement of Order XXI Rule 16, insofar as the assignment or the transfer of the decree would in that event, be effectuated by an assignment in writing, which became a complete equitable assignment of the decree when passed.
What is categorically held is, that if the plaintiff was to be declared as assignee of the decree, subsequently passed in favour of the defendant and entitled to release the decretal amount by execution, he could himself avail the provisions of Order XXI Rule 16 as the assignee of the decree which was passed subsequent to the date of assignment in writing in its favour.
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It is held that even if the equitable assignment be construed as falling within an 'assignment in writing' contemplated by Order XXI Rule 16 of the Code, it would in terms require an assignment of decree which was passed in future in favour of the assignor. Reference was made to another aspect in relation to the actionable claim and propounding upon the same, it was concluded as below:
"56 The debt which is the subject- matter of the claim is merged in the decree 'and the transferee of the actionable claim becomes entitled by virtue of the assignment in writing in his favour not only to the book debt but also to the decree in which it has merged. The book debt does not lose its character of a debt by its being merged in the decree and the transferee is without anything more entitled to the benefit of the decree passed by the court of law in favour of the transferor. It would have been open to the transferee after the execution of the deed of assignment in his favour to take steps under Order 22, rule 10 of the Code of Civil Procedure to have himself substituted in the pending litigation as a plaintiff in place and stead of the transferor and prosecute the claim to judgment; but even if he did not do so he is not deprived of the benefit of the decree ultimately passed by the court of law in favour of the transferor, the only disability attaching to his position being that under Section 132. of the Act he would take the actionable claim subject to all the liabilities and equities to which the transferor was subject in respect thereof at the date of the transfer. The transferee of the actionable claim thus could step into the shoes of the transferor and claim to be the transferee of the decree by virtue of the assignment in writing executed by the transferor in his favour and could therefore claim to execute the decree as transferee under Order 21, rule 16 of the, Code of Civil Procedure.
For the reasoning to the above effect, the contention of Mr.Khandeparkar that the Assignment did not make the applicant entitle to seek execution of the decree, do not hold any merit and ARF is perfectly justified in seeking execution of decree in favour of HSBC Bank.
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38 Another point on which Mr.Khandeparkar has
opposed Execution Application as well as the present Interim Application is that the respondent was not notified of the Assignment of Debts of Bhatia Trading Co. LLC, by HSBC Bank in favour of the applicant.
The response of Mr.Jagtiani to this objection, is the respondent nos.1 to 3, being the borrower and respondent nos.1 and 2 being the guarantors of HSBC, there is no imperative mandate for them to be notified or of obtaining their consent prior to assignment of the debt.
The debts are the property of HSBC Bank and it is at liberty to assign it even without consent or notice to the borrowers. Without prejudice to the aforesaid. it is also demonstrated on behalf of the applicant that on 13/9/2021, an email was addressed by HSBC Bank to "finance@bhatia traders.com and similarly, on 14/10/2021, email from recovery agent of the applicant, Grant Thornton UK LLP, intimated about the assignment and there is no denial from the respondent nos.1 and 2 that [email protected] is the email address of respondent no.3 and I am not ready to buy an argument that the respondent nos.1 and 2 had no access to the email ID. In fact, in the sur-rejoinder, respondent nos.1 and 2 have admitted that email dated 14/10/2021 from Grand Thorton was received. Notice upon the official email of respondent no.3 would be Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 44/49 IAL 28351-23 ARF.doc deemed to be a notice served upon respondent nos.1 and 2 and therefore, this objection also deserve rejection. 39 Another objection of Mr.Khandeparkar that no leave was sought under Order XXI Rule 16 of CPC from the Court, is also without any merit, since sub-rule(2) of Rule 22, the Court has discretion to issue process without issuance of notice, if it is of the opinion that issuance of notice would cause unreasonable delay or defeat the ends of justice. My attention is also invited to the Amendment by the Bombay High Court with effect from 1/11/1966, by which sub-rule (3) has been inserted in Rule 22 of Order XXI which reads thus :-
"Notwithstanding anything contained in sub-rules (1) and (2) above, no order for the execution of a decree shall be invalid, merely by reason of the omission to issue notice under this rule, unless the judgment debtor has sustained injury by reason of such omission"
In the wake of the above, the objection raised is overruled. 40 Yet one more objection, that HSBC Bank is also not put to notice in the Execution Application, is also a frivolous objection as HSBC Bank under the Assignment Agreement is already aware that the applicant is competent to initiate proceedings in India, pursuant to the final decree and if the whole purpose of Order XXI Rule 16 is to bring the parties to the Court on giving notice, HSBC being the assignor of the debt and the decree which is sought to be executed by the applicant, there is no need to notify it or implead it as a party to the proceedings and this objection cannot defeat the application for execution.
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Another submission that the Assignment Agreement and the Assignment Form being unstamped and hence unenforceable and inadmissible in evidence, in my opinion, would not come in the way of granting urgent reliefs in favour of a party and in any case, the bar under Maharashtra Stamp Act, 1958, is to the admissibility of evidence at the stage of trial and not applicable to the execution Application. In any case, the Assignment Agreement in respect of debts under the loan document came to be executed in UAW and it is not an instrument that relates to property or to a thing done or to be done within Maharashtra or for that matter, within India and so the provisions of Maharashtra Stamp Act, cannot be made applicable to it. The execution of the decree definitely cannot be termed as "thing to be done" under an instrument, which is chargeable with duty under the Stamp Act.
41 One more submission of Mr. Khandeparkar must also be specifically adverted to, being the final order and decree dated 29/11/2022 is founded on breach of the law in force in India and hence, the execution cannot proceed in terms of Section 13(f) of the Code of Civil Procedure and it is his submission that the guarantees of respondent no.1 and 2 were not given prior approval of RBI as per Regulation 3 of the Foreign Exchange Management (Guarantees) Regulations 2000 and since it violates the law in force in India, there can be no execution of the decree.
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42 The Regulations of 2000, to which Mr.Khandeparkar
has placed reliance in Section 3 prescribe a prohibition which reads thus :-
"3 Prohibition : Save as otherwise provided in these regulations, or with the general or special permission of the Reserve Bank, no person resident in India shall give a guarantee or surety in respect of, or undertake a transaction, by whatever name called, which has the effect of guaranteeing, a debt, obligation or other liability owed by a person resident in India to, or incurred by, a person resident outside India.
The above provision do not contemplate that the permission of RBI shall be obtained, prior in time of submission of the guarantee and the words used "or with the general or special permission of Reserve Bank" cannot be construed as prior permission as, wherever the regulations of Reserve Bank of India contemplate prior permission to be obtained, provisions to that effect are specifically introduced. Apart from this, the FEMA regime would not be triggered when there is no outflow of foreign exchange out of India or when foreign exchange is not being repatriated out of India.
The UAE Courts have held respondent no.1 and 2 liable in their capacity as guarantors under the Federal Law concerning commercial transactions in the order dated 14/6/2021 and what the applicant is seeking, is execution of the decree. In any case, it is not open for the Executing Court to go beyond the decree as it is bound by the terms and stipulations therein.
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43 The argument that respondent nos.1 and 2 never
consented to assign their personal guarantees and such assignment is impermissible in law, is also as hollow as the other objections, as Clause 7 of the deeds of personal guarantee under the signature of respondent no.1 and respondent no.2 dated 16/5/2018, clearly reveal that the guarantees were transferrable and assignable only by HSBC Bank and by the act of Assignment by HSBC, respondent no.1 and 2 have deemed to have consented to the assignment of the personal guarantees under the deeds. The Assignment Agreement clearly cover, each facility agreement, each security and each guarantee and hence, when HSBC Bank assigned its debt along with the securities, it included the personal guarantees by respondent no.1 and respondent no.2, in favour of the applicant, it do not lie in their mouth to deny assignment of their guarantees.
44 In any case, the long and short of the entire discussion on the objections raised by Mr.Khandeparkar is, as borrowers, they have no say in the matter as they were bound to discharge their obligations to HSBC under the loan documents/facility agreement and when they have utterly failed to discharge their obligations, either the HSBC Bank or the Applicant ARF to whom HSBC has assigned its right and interest can seek the execution of the decree in favour of HSBC Bank and since I have already held that even this decree by virtue of the Sale Purchase Agreement dated 9/9/2021 stand assigned in favour of the Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 ::: 48/49 IAL 28351-23 ARF.doc applicant, there is no sustainable ground, on which the same shall face resistance.
The borrower now cannot raise frivolous objections in an attempt to avoid execution of the decree, which is clearly based on its failure to discharge the obligations, which respondent nos.1 to 3 owed HSBC Bank, with the only difference that in place of the Bank, it is now the applicant who is chasing them for the sum of money, due and payable under the decree passed by a competent court of law.
45 Mr.Jagtiani, learned senior counsel has pressed for prayer clause (b) for grant of disclosures by the respondents and a prohibitory order to prevent the respondent nos.1 and 2 from dissipating the assets. Upon the disclosure of the assets, the applicant definitely shall be in a position to execute the decree for recovery of the money payable under it, from the assets of respondent nos.1 and 2 in India, as it has now become clear that no money was realised from the proceedings instituted by HSBC in UAE and Mr. Jagtiani has placed on record the progress of the execution proceedings in UAE, when it was reported to the Court that the office of the Company was closed and as on date, the execution proceedings filed in UAE has met a dead wall and no sum is recovered in UAE.
The relief of disclosure in any case, will act in aid of the execution of the decree, which, the applicant is entitled to seek in the wake of the assignment in its favour from HSBC Bank.
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46 As an upshot of the above, I deem it appropriate to
grant relief in terms of prayer clauses (B) and (C) of Interim Application, which reads to the following effect:-
"(B) Order and direct the 1st to 3rd Respondents to state on oath with such time as this Hon'ble Court deems fit, (i) full and complete details of assets (fixed assets and current assets including all moveable and immovable properties, tangible and intangible assets), current assets, receivables as on date of the Final Judgment, (ii) furnish copies of the Annual Returns filed before the Income Tax Authorities for the last 3 accounting years and also (iii) furnish a list of all their bank accounts with copies of the statements of accounts of the same for the last 2 accounting years.
(C) Restrain the Respondents, either by themselves or through employees, servants, agents, and trustees, or any person acting through them or in their behalf or otherwise by an order of injunction, from in any manner selling, transferring, disposing of, or alienating or encumbering or pledging or mortgagimg or hypothecating or charging or parting with possession of or inducting anyone else in respect of the properties as set out in Schedule A to the Application and assets and estate of Respondents as may be disclosed on oath or as may be known to the Applicant during the pendency of these proceedings."
47 The respondent nos.1 to 3 shall offer disclosure indicated above within a period of four weeks from the date of uploading of the order.
Dependent upon the disclosures, the other reliefs in the Interim Application shall be considered.
( SMT. BHARATI DANGRE, J.) Tilak ::: Uploaded on - 10/04/2024 ::: Downloaded on - 16/04/2024 08:39:37 :::