Bombay High Court
The Bank Of New York Mellon vs Zenith Infotech Limited & Ors on 16 April, 2014
Author: S.C. Gupte
Bench: S.C. Gupte
sat 1/7 chs 1945-2011.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CHAMBER SUMMONS NO. 1945 OF 2011
IN
SUIT NO. 2865 OF 2011
The Bank of New York Mellon, London Branch
(formerly known as the Bank of New York, London Branch) ..Plaintiff
vs.
Zenith Infotech Limited & Ors. ..Defendants
Mr.Navroz Seervai, Senior Advocate with Mr.Rahul Narichania, Senior Advocate,
Mr.Sahil Kanuga i/b. M/s. AZB & Partners for Plaintiff.
Mr.Arif Bookwala with Mr.Zal Andhyarujina i/b. M/s.Doijode & Associates for
Defendant Nos.1, 5 and 6.
Mr.Darius Khambatta, Senior Advocate with Mr.Sharan Jagtiani, Mr.Aditya Mehta
i/b. M/s..Nishith Desai & Associates for Defendant Nos.2, 3 and 4.
CORAM : S.C. GUPTE, J.
ORDER RESERVED ON : 20 FEBRUARY 2014
ORDER PRONOUNCED ON : 16 APRIL 2014
JUDGMENT :
The Chamber Summons is taken out by Defendant No.3 for revocation of the leave granted to the Plaintiff under Clause XII of the Letters Patent or in the alternative, deletion of Defendant No.3 from the array of parties to the suit.
2. The Plaintiff is a US national banking corporation engaged inter alia in the business of providing corporate trustee services. Defendant No.1 is a public company incorporated in India, listed on the Bombay and National Stock Exchanges. In 2006 and 2007, Defendant No.1 issued convertible bonds of US $ 33,000,000 due 2011 and US $ 50,000,000 due 2012 and entered into two separate trust deeds with the Plaintiff, under which the latter was appointed as trustee of bondholders. Under the trust deeds, Defendant No.1 inter alia ::: Downloaded on - 23/04/2014 23:32:56 ::: sat 2/7 chs 1945-2011.doc covenanted to pay to the order of the Plaintiff in London in US dollars the principal amounts of the 2011 bonds and 2012 bonds, respectively, on the dates of the bonds becoming due for redemption together with the applicable premium.
Defendant No.1 failed to pay the amounts due under the 2011 bonds on their maturity date. The Plaintiff thereupon issued a notice of default to Defendant No.1. Since no payment was forthcoming in response, the Plaintiff issued a letter of demand for 2011 bonds and a notice of acceleration for 2012 bonds on instructions of bondholders of 2011 bonds and 2012 bonds, respectively. The Plaintiff claims sums of US $ 36,046,369.55 under the 2011 bonds and US $ 53,752,833.33 under the 2012 bonds from Defendant No.1 with default interest.
3. It is the case of the Plaintiff that a certain business of Defendant No.1 (the Remote Monitoring and Management Business or 'MSD Business') was being spun off into Defendant No.4, an Indian company which was a 100% subsidiary of Defendant No.2; that Defendant No.2 was in turn set up as a Special Purpose Vehicle ('SPV') either by Defendant No.1 or Defendant No.3 (a private equity fund in USA) under the laws of State of Delaware, USA; that Defendants No.5 and 6 are promoters and directors of Defendant No.1, and shareholders and directors in Defendant No.4; and that all the Defendants are related parties, acting in collusion to defeat the Plaintiff's rights and have structured the sale of MSD Business in a manner so as to frustrate the legitimate claims of the 2011 and 2012 bondholders. The Plaintiff, accordingly, seeks an order declaring the transaction in relation to MSD Business as null and void and in breach of the fiduciary duty owed by Defendant No.1 to its shareholders and the Plaintiff.
4. The Plaintiff claimed in the suit that Defendant Nos.1, 2 and 4 to 6 had their offices in Mumbai, but Defendant No.3 was carrying out business outside the jurisdiction of this Court (in Boston, USA). The Plaintiff applied for leave under clause XII of the Letters Patent before filing the suit. The application for leave was on the footing that a material part of the cause of action in the present suit arose in Mumbai inter alia as the trust deeds were executed in Mumbai. Even as far as Defendant No.3 was concerned, it was the Plaintiff's case that the Defendant had issued a press release concerning transfer of the MSD Business on its website ::: Downloaded on - 23/04/2014 23:32:56 ::: sat 3/7 chs 1945-2011.doc which was accessible in Mumbai, and that thus a part of the cause of action even against Defendant No.3 had arisen in Mumbai. This Court allowed the Plaintiff's application for leave under Clause XII.
5. Defendant No.3 applies for revocation of that leave on the ground that no part of the cause of action against Defendant No.3 arose in Mumbai; that announcement of the sale of the MSD Business on its website, which is accessible in Mumbai, cannot be said to be a part of the cause of action accruing in Mumbai; and that therefore the leave granted under Clause XII ought to be revoked.
6. The Plaintiff has filed an additional affidavit in reply to the Chamber Summons contending inter alia that in the month of February 2012, Defendant No.3 has opened its office in Mumbai and has been carrying on business from the Mumbai office, address of which is given in the additional affidavit. The Plaintiff, accordingly, submits that this Court would in any event have jurisdiction to try the suit qua Defendant No.3 on the ground that it carried on business in Mumbai, even without leave under Clause XII.
7. Learned Counsel for Defendant No.3 submits that the Plaintiff has not amended its plaint yet, and the plaint still proceeds on the footing that Defendant No.3 carried on business outside the jurisdiction of this Court and only upon leave being granted, this Court would have jurisdiction to entertain and try the suit against Defendant No.3. The learned Counsel further submits that in any event, in a suit for which leave to sue under Clause XII is granted, the plaint cannot be afterwards amended, since the grant of leave must be taken to relate to the suit as put forward in the plaint on which leave is endorsed by the judge accepting it. The learned Counsel relies on the judgments of our Court in the cases of Rampurtab Samruthroy vs. Premsukh Chandamal 1 and Motilal Tribhovandas Choksey vs. Shankarlal Chhaganlal 2 and of the Calcutta High Court in the case of Baraset Basirhat Light Railway Co.Ltd. vs. District 1 Volume VIII 15 Bom.93 2 AIR 1939 Bombay 345 ::: Downloaded on - 23/04/2014 23:32:56 ::: sat 4/7 chs 1945-2011.doc Board of the 24-Pergunnahs3.
8. On the other hand, it is submitted by learned Counsel appearing for the Plaintiff that this Court would have jurisdiction to entertain the suit even if during the pendency of the suit, the Defendant sets up an office and carries on business within its jurisdiction. The learned Counsel relies on the judgment of the Supreme Court in Jindal Vijayanagar Steel (JSW Steel Ltd.) vs. Jindal Praxair Oxygen Co.Ltd.4
9. The questions which essentially arise in the Chamber summons are : (1) whether this Court can assume jurisdiction to entertain the suit against Defendant No.3 by reason of its having acquired an office within the jurisdiction of this Court during the pendency of the suit and (2) whether the leave granted under Clause XII needs to be revoked on the ground that no part of cause of action arose against Defendant No.3 within the jurisdiction of this Court.
10. As for the first question, our Court in the case of Fazlehussein Haiderbhoy Buxamusa vs. Yusufally Adamji 5 considered the question of territorial jurisdiction of this Court under Clause XII of the Letters Patent in a case where the court had no jurisdiction to entertain a suit at the date of institution of the suit, but on the date when the issue of jurisdiction was tried, the defendant had acquired a place of business within the jurisdiction of the court. This is what our court had to say :
"Even if this Court had jurisdiction to entertain the suit as filed, if by reason of subsequent events the Court has lost jurisdiction to entertain or try the suit, this Court will not be justified in dealing with the suit with reference to circumstances as they existed at the date of the institution of the suit, but must proceed to decide the dispute on the footing that if the suit had been filed at this date, the Court would have been incompetent to grant the reliefs in respect of the properties and of the persons who are not within the limits of the jurisdiction of this Court. Normally a Court must have regard to circumstances existing as at the date when the issue of jurisdiction is tried and must decide it in the light 3 AIR (33) 1946 Calcutta 23.
4 (2006) 11 SCC 521
5 AIR 1955 Bom 55
::: Downloaded on - 23/04/2014 23:32:56 :::
sat 5/7 chs 1945-2011.doc
of circumstances existing as at that date."
This paragraph was quoted with approval by the Supreme Court in Jindal Vijayanagar Steel's case (supra).
11. It is clear from the proposition of law laid down in Fazlehussein's case and affirmed in Jindal Vijayanagar Steel's case that the issue of territorial jurisdiction of a court needs to be decided in the light of circumstances existing at the date when the issue of jurisdiction is tried by the court. If on that date the court has territorial jurisdiction by virtue of either residence of, or carrying on of business by, the defendant, the court can very well entertain and try the suit. The question now is, whether there is any restriction in applying this law to the facts of the present suit in view of its institution being on the basis of a leave under Clause XII. No doubt as held by our court in the cases of Rampurtab Samruthroy (supra) and Motilal Tribhovandas Choksey (supra), leave granted under Clause XII, which affords the very foundation of jurisdiction of the court, is confined to the plaint at the date of the leave and the plaint cannot be afterwards amended so as to alter that cause of action. The rationale behind the rule is that leave is a judicial act relating solely to the cause of action set out in the plaint at that date and not to the altered cause of action which was not before the court when it granted the leave. But then it must be remembered that this dictum concerns the 'cause of action' with reference to which the leave was granted and which cannot be subsequently altered. Residence or business of the defendant at the place of jurisdiction is not part of the cause of action. The territorial jurisdiction of a court is based either on the place of accrual of the cause of action or the place of residence or business of the defendant. A long as the amendment does not alter the cause of action or its accrual, the amendment does not offend the principle of law laid down in these cases. In the present case, what the Plaintiff contends is that Defendant No.3 has now acquired a place of business within the jurisdiction of this court and therefore, quite apart from the place of accrual of the cause of action, this Court has territorial jurisdiction over the matter. There is no question here of amendment or alteration of cause of action and therefore, the grant of leave by this Court earlier does not come in the way of such amendment.
::: Downloaded on - 23/04/2014 23:32:56 :::sat 6/7 chs 1945-2011.doc
12. There is one more reason why this must be so. The principle on which an amendment is refused in a suit filed upon leave under Clause XII is that such amendment alters the cause of action and therefore, a fresh leave is necessary in respect of the altered cause of action. In the present case, there is no question of any fresh leave. If territorial jurisdiction is conferred on the court by reason of change in residence or business of the defendant, the leave granted earlier may at best be said to have become redundant, but there is no question of any fresh leave being required. By definition a leave is ruled out rather than required in such a case.
13. The net result of the discussion is that Defendant No.3 having acquired a place of business within the territorial jurisdiction of this Court after the filing of the suit, this court would, in any event, whether or not the leave granted earlier is revoked, have jurisdiction to entertain and try the suit, by incorporating such averments. Grant of leave under Clause XII earlier in the suit cannot come in the way of such amendment.
14. The second question is whether the leave was rightly granted in the first place. The argument of the Defendant is that no part of cause of action has arisen within the jurisdiction of this Court so far as Defendant No.3 is concerned.
The cause of action as pleaded against Defendant No.3 is that Defendant No.3 has colluded with Defendant No.1 and established Defendant No.2 company to take over the MSD business of Defendant No.1 though another new company, namely, Defendant No.4 and that the transaction is so structured as to defeat the Plaintiff's rights under the trust deed in respect of the MSD business which is the property of Defendant No.1 and to which the Plaintiff must have recourse. The execution of the Trust deed in Mumbai and incorporation of Defendant No.4 in Mumbai, would definitely form part of such cause of action and therefore, the leave granted under clause XII against Defendant No.3 cannot be said to be wrongly granted.
15. Having regard to the above position, the other alternative ground for ::: Downloaded on - 23/04/2014 23:32:56 ::: sat 7/7 chs 1945-2011.doc claiming accrual of cause of action within Mumbai, namely, the announcement on the website of Defendant No.3, which is accessible in Mumbai, need not be considered in the present application for revocation of leave.
16. There is no merit, thus, in the Chamber Summons. The Chamber Summons is dismissed. There shall be no order as to costs.
(S.C. Gupte, J.) ::: Downloaded on - 23/04/2014 23:32:56 :::