2016 SCC Online Bom 9019 in The High Court of Bombay

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Commercial Appeal No. 7 of 2016
Hubtown Limited v. IDBI Trusteeship Service Limited
2016 SCC OnLine Bom 9019
In the High Court of Bombay

(BEFORE ANOOP V. MOHTA AND G.S. KULKARNI, JJ.)
Hubtown Limited, incorporated under the Companies Act, 1956

and having its registered office at Hubtown Solaris, 2nd Floor,
N.S. Phadke Marg, Opp. Telli Gully, Near Hotel Regency, Andheri
(East), Mumbai-400 069 .…. Appellant (Original Defendant)
v.
IDBI Trusteeship Service Limited, incorporated under the
Companies Act, 1956 and having its registered office at Asian
Building, Ground Floor, 17 Road, Kamani Marg, Ballard Estate,
Mumbai-400 001 .…. Respondent (Original Plaintiff)
Mr. Janak Dwarkadas, Senior Advocate a/w Mr. Simil Purohit, Mr. Aditya Thakkar,
Mr. Nishit Dhruva, Mr. Prakash Shinde, Mr. Chirag Bhavsar i/by MDP & Partners for the
Appellant.
Mr. F.E. Devitre, Senior Advocate a/w Mr. Kunal Dwarkadas, Mr. Verghese Thomas,
Ms. Aditi V. Deshpande, Mr. Yohana Lumathawalla i/by J. Sagar Associates for the
Respondent.
In
Summons For Judgment No. 111 of 2014
In
Summary Suit No. 776 of 2014
With
Notice of Motion (Lodging) No. 2028 of 2016
In
Decided on October 24, 2016
A. Courts, Tribunals and Judiciary — Commercial Courts, Commercial Division and
Commercial Appellate Division of High Courts Act, 2015 — S. 13 — Commercial Appeal —
Maintainability — Appeal under S. 13 is maintainable once suits, petitions applications and
appeals are transferred and treated as commercial disputes having specified value — Where
Commercial Division Judge has taken decision and/or passed ‘judgment’ and/or ‘order’ or
‘decree’ — Appeal against any final decision include judgment so passed by Commercial
Court and/or Commercial Division — Proviso to S. 13(1) will not be applicable to such
decision/judgment as proviso refers to ‘orders’ — However Appeal under S. 13(1) even if
there is an order but which has a tinge of judgment — Appeal under S. 13 against such
order being a ‘judgment’ within meaning of CPC is maintainable
(Paras 32 and 33)
Shah Babulal Khimji v. Jayaben D. Kania, (1981) 4 SCC 8; Midnapore Peoples' Co-op. Bank Ltd. v.
Chunilal Nanda, (2006) 5 SCC 399; Shah Babulal Khimji v. Jayaben D. Kania, (1981) 4 SCC 8,
relied on
B. Courts, Tribunals and Judiciary — Commercial Courts, Commercial Division and
Commercial Appellate Division of High Courts Act, 2015 — Ss. 13 and 16 — Commercial
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Appeal — Maintainability — Summary Suit and Summary Judgment — Once summary suit as
originally filed prior to commencement of and as now transferred being commercial dispute
matter — Original procedure as provided under Or. 37 CPC shall be applicable to such
summary suits — Parties are not entitled to prayer for summary judgment under Or. 13-A
CPC — Hence judgments and issues so decided in summary suit shall for all purposes be
governed by CPC even after such suits are transferred as commercial suits — Commercial
Division Judge is required to follow original CPC and is required to keep in mind position in
law revolving around all facets of summary suits — Provisions of S. 13 is required to be
interpreted and/or considered accordingly when any decision is given by Commercial
Division/Court in such summary suit — Proviso to S. 13(1) will not affect maintainability of
such Appeal so filed against such order/judgment passed by Commercial Division/Court in
such summary suit
(Para 34)
C. Courts, Tribunals and Judiciary — Commercial Courts, Commercial Division and
Commercial Appellate Division of High Courts Act, 2015 — S. 13 — Commercial Appeal —
Right to — Appeal is available if commercial suit/dispute is dealt with by Commercial
Division/Commercial Court and passes order/judgment and/or take decision — This
statutory Appeal as provided cannot be taken away — Notwithstanding anything contained
in any other law for time being in force or Letters Patent of a High Court
(Para 36)
Garikapati Veeraya v. N. Subbiah Choudhry, AIR 1957 SC 540; Kamal Kumar Dutta v. Ruby General
Hospital, (2006) 7 SCC 613, relied on
D. Courts, Tribunals and Judiciary — Commercial Courts, Commercial Division and
Commercial Appellate Division of High Courts Act, 2015 — S. 19 and 20 — Commercial suits
— Transfer — Commercial disputes of specified value — There is no scope to any authority
not to transfer commercial suits having one crore and above valuation for purpose of
pecuniary jurisdiction — All are bound by provisions including amended CPC to expedite
pending Suits filed prior or post Commercial Courts Act — Appeals are also expedited by
provisions so also pending Arbitration Petitions/Appeals as specified — Though filed prior to
enforcement of Commercial Courts Act
(Para 39)
Arun Dev Upadhyaya v. Integrated Sales Service Ltd., 2016 (9) Scale 427, relied on
E. Civil Procedure Code, 1908 — Or. 37 Rr. 2, 3 — Leave to defend — Triable issue —
Bona fide defence — Case of misconstruction or interpretation of all connected documents
itself is good defence — It cannot be treated as sham or bogus defence — Misinterpretation
itself affects rights and transaction/claim — Therefore construction of documents is always
question of law — In instant case findings given by Single Judge on documents being
severable or unseverable — Goes to root of interpretation and construction of same
documents and related transactions — Contrary view so expressed by Judge in impugned
order in view of earlier findings itself require a consideration in suit — Particularly when
another Single Judge has prima facie held document/guarantee is inseverable — Distinction
in summary proceedings like this itself will not sufficient to deny order of unconditional leave
as granted by one Judge on basis of same documents
(Paras 55, 56)
BOI Finance Ltd. v. Custodian, (1997) 10 SCC 488; Canbank Financial Services Ltd. v. Custodian,
(2004) 8 SCC 355, relied on
F. Civil Procedure Code, 1908 — Or. 37 Rr. 2, 3 — Leave to defend — When can be given
— Principles to be followed reiterated
(Paras 59, 60)
Mechelec Engineers & Manufacturers v. Basic Equipment Corpn., (1976) 4 SCC 687; Sunil
Enterprises v. SBI Commercial & International Bank Ltd., (1998) 5 SCC 354; State Bank of
Saurashtra v. Ashit Shipping Services (P) Ltd., (2002) 4 SCC 736; R. Savarna Prabhu v. Videocon
Leasing; Industrial Finance Ltd., (2013) 14 SCC 606, relied on
The Judgment of the Court was delivered by
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ANOOP V. MOHTA, J.:— This Commercial Appeal is filed by the Appellant-Original
Defendant against the Judgment and order dated 6 June 2016, passed by the learned
Single Judge of the Commercial Division in Summons for Judgment whereby, refused
an unconditional leave to defend and has granted a leave to defend, but conditional.
Preliminary objection to the maintainability of Commercial Appeal.
2. To decide the preliminary objection of the maintainability of Commercial Appeal
as filed, as raised by the learned Senior Counsel appearing for the Respondents,
though the parties have consented to hear the Appeal on merits, we have re-listed the
matter for hearing on the maintainability as it goes to the root of the matter in view of
the confusion prevailing in the Office/Registry after the transfer of such pending
summary suits because of the provisions of The Commercial Courts, Commercial
Division and Commercial Appellate Division of High Courts Act, 2015 (for short, “The
Commercial Courts Act”).
Background of proceedings-
3. The following are the background dates of the proceedings as per the
Respondent-Plaintiff (IDBI) to decide the maintainability of the Commercial Appeal
under Section 13 of the Commercial Courts Act, apart from decision on merits.
4. On 11/09/14, Summary Suit No. 776 of 2014 was filed by the Respondent
(Plaintiff) (IDBI) on 11 September 2014, seeking a decree in the sum of over Rs. 33
crores.
5. During the pendency of the Summary Suit, the Commercial Courts, Commercial
Division, Commercial Appellate Division of High Courts Ordinance, 2015 (the
Ordinance) was promulgated on 23 October 2015 with immediate effect. The
Ordinance inter alia provided for the constitution of Commercial Divisions in High
Courts having ordinary original civil jurisdiction.
6. An order/notice dated 17 November, 2015 was issued by the then Hon'ble the
Acting Chief Justice constituting the Commercial Division and Commercial Appellate
Division under Sections 4 and 5 of the Ordinance.
7. The then Hon'ble Acting Chief Justice also issued an Assignment Order dated 22
December, 2015 of the Original Side of this Court to take effect from 4 January 2016,
constituting the Commercial Division and the Commercial Appellate Division of this
High Court and nominating Judges for the same. Mr. Justice S.C. Gupte was
nominated as the “Commercial Division” of this Court and assigned all summary suits,
i.e. including the present Summary Suit. Assignment Order dated 22 December 2015,
was the order constituting the Commercial Division and Commercial Appellate
Division. The Commercial Courts Act does not prescribe any particular form of the
order to constitute such Divisions. The Chief Justice is required to pass only an
administrative order, not a judicial order.
8. On 1 January, 2016, the Commercial Courts Act came to be notified in the
Official Gazette with effect from 23 October 2015.
9. On 4 January 2016, the Commercial Divisions and the Commercial Appellate
Divisions as constituted, have commenced functioning accordingly. On 7 January
2016, and from time to time thereafter, the Assignment Orders were varied as under:
a) Notice dated 7 January 2016 in partial modification of the Assignment order
dated 22 December 2015.
b) Assignment order dated 3 March 2016 with effect from 7 March 2016.
c) Assignment order dated 15 March 2016 with effect from 21 March 2016.
d) Assignment order dated 19 August 2016 with effect from 22 August 2016.
10. At all relevant times, the learned Judge continued to be nominated as the
“Commercial Division” of this Court assigned to hear all summary suits, including the
present summary suit.
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11. The Summons for Judgment in the Summary Suit was argued finally on merits
by the counsel for the parties before the Commercial Division on 12 and 14 January
2016 and was reserved for orders on 14 January 2016.
12. On 13 May 2016, pending the final order in the Summons for Judgment, the
captioned Summary Suit was formally transferred by a notice issued by the High Court
(along with several other suits and proceedings) to the Commercial Divisions of this
Court. The impugned order dated 6 June 2016 granting the conditional leave to defend
the suit was passed by the learned Single Judge.
13. On 12 July 2016, this Appeal was filed as a Commercial Appeal before this
assigned Commercial Appellate Division of this Court. On 29 August 2016, this Appeal
by consent, was heard finally on merits at the admission stage and the matter was
closed for orders. The time to deposit has been extended till this date.
14. On 1 September 2016 and 16 September 2016, this Appeal was listed for
directions and submissions on the question of the maintainability of this Appeal.
15. Admittedly, for the Letters Patent Appeals under the Letters Patent Act, another
Division Bench has been assigned to deal with the same. Apart from above, the
submission is made that they have already moved a praecipe for passing final order
even on merits, in either situation, by this Bench as we have already heard the matter
on merits also. The Hon'ble the Chief Justice has passed order on 14 October 2016,
accordingly.
The Commercial Courts Act-
16. To provide for the constitution of Commercial Courts, Commercial Division and
Commercial Appellate Division in the High Courts for adjudicating commercial disputes
of specified value and matters connected therewith or incidental thereto.
17. It is relevant to note that Law Commission of India in its 253 Report has
recommended the establishment of Commercial Courts, the Commercial Division and
the Commercial Appellate Division in the High Courts for disposal of commercial
disputes of specified value.
18. On 23 December 2015, the Commercial Courts Act, having retrospective effect
from 23 October 2015 by repealing the ordinance with the following rider has been
promulgated-
“Section 23 - Repeal and savings.-(1) The Commercial Courts, Commercial
Division and Commercial Appellate Division of High Courts Ordinance, 2015 (Ord. 8
of 2015) is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action taken under the
said Ordinance, shall be deemed to have been done or taken under the
corresponding provisions of this Act.”
19. The action and/or anything done under the Ordinance, in view of Section 23 of
Commercial Courts Act, should be deemed to have been done or taken under the
corresponding provisions of the Commercial Courts Act.
20. The basic concepts and terms have been elaborated are reproduced below:-
“Section 2 - Definitions:- (1) In this Act, unless the context otherwise
requires,-
“(a) “Commercial Appellate Division” means the Commercial Appellate Division in
a High Court constituted under sub-section (1) of section 5;”
(b) “Commercial Court” means the Commercial Court constituted under sub-
section (1) of section 3;
(c) “commercial dispute” means a dispute arising out of-
(i) ordinary transactions of merchants, bankers, financiers and traders such as
those relating to mercantile documents, including enforcement and
interpretation of such documents;
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(ii) export or import of merchandise or services;

(iii) issues relating to admiralty and maritime law;
(iv) transactions relating to aircraft, aircraft engines, aircraft equipment and
helicopters, including sales, leasing and financing of the same;
(v) carriage of goods;
(vi) construction and infrastructure contracts, including tenders;
(vii) agreements relating to immovable property used exclusively in trade or
commerce;
(viii) franchising agreements;
(ix) distribution and licensing agreements;
(x) management and consultancy agreements;
(xi) joint venture agreements;
(xii) shareholders agreements;
(xiii) subscription and investment agreements pertaining to the services
industry including outsourcing services and financial services;
(xiv) mercantile agency and mercantile usage;
(xv) partnership agreements;
(xvi) technology development agreements;
(xvii) intellectual property rights relating to registered and unregistered
trademarks, copyright, patent, design, domain names, geographical
indications and semiconductor integrated circuits;
(xviii) agreements for sale of goods or provision of services;
(xix) exploitation of oil and gas reserves or other natural resources including
electromagnetic spectrum;
(xx) insurance and re-insurance;
(xxi) contracts of agency relating to any of the above; and
(xxii) such other commercial disputes as may be notified by the Central
Government.
Explanation.— A commercial dispute shall not cease to be a commercial dispute
merely because-
(a) it also involves action for recovery of immovable property or for realisation of
monies out of immovable property given as security or involves any other
relief pertaining to immovable property;
(b) one of the contracting parties is the State or any of its agencies or
instrumentalities, or a private body carrying out public functions;”
(d) to (h)
(i) “Specified Value”, in relation to a commercial dispute, shall mean the value of
the subject-matter in respect of a suit as determined in accordance with
section 12 which shall not be less than one crore rupees or such higher value,
as may be notified by the Central Government.”
“Section 5 - Constitution of Commercial Appellate Division- (1) After
issuing notification under sub-section (1) of section 3 or order under sub-section
(1) of section 4, the Chief Justice of the concerned High Court shall, by order,
constitute Commercial Appellate Division having one or more Division Benches for
the purpose of exercising the jurisdiction and powers conferred on it by the Act.
(2) The Chief Justice of the High Court shall nominate such Judges of the High
Court who have experience in dealing with commercial disputes to be Judges of the
Commercial Appellate Division.”
“Section 6 - Jurisdiction of Commercial Court- The Commercial Court shall
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have jurisdiction to try all suits and applications relating to a commercial dispute of
a Specified Value arising out of the entire territory of the State over which it has
been vested territorial jurisdiction.
Explanation.- For the purposes of this section, a commercial dispute shall be
considered to arise out of the entire territory of the State over which a Commercial
Court has been vested jurisdiction, if the suit or application relating to such
commercial dispute has been instituted as per the provisions of sections 16 to 20 of
the Code of Civil Procedure, 1908 (5 of 1908).”
“Section 8” - Bar against revision application or petition against an
interlocutory order - Notwithstanding anything contained in any other law for the
time being in force, no civil revision application or petition shall be entertained
against any interlocutory order of a Commercial Court, including an order on the
issue of jurisdiction, and any such challenge, subject to the provisions of section 13,
shall be raised only in an appeal against the decree of the Commercial Court.
“Section 9 - Transfer of suit if counterclaim in a commercial dispute is of
Specified Value-(1) Notwithstanding anything contained in the Code of Civil
Procedure, 1908 (5 of 1908), in the event that a counterclaim filed in a suit before a
civil court relating to a commercial dispute is of Specified Value, such suit shall be
transferred by the civil court to the Commercial Division or Commercial Court, as
the case may be, having territorial jurisdiction over such suit.
(2) In the event that such suit is not transferred in the manner contemplated in
sub-section (1), the Commercial Appellate Division of the High Court exercising
supervisory jurisdiction over the civil court in question may, on the application of
any of the parties to the suit, withdraw such suit pending before the civil court and
transfer the same for trial or disposal to the Commercial Court or Commercial
Division or, as the case may be, having territorial jurisdiction over such suit, and
such order of transfer shall be final and binding.”
“Section 10 - Jurisdiction in respect of arbitration matters- Where the
subject-matter of an arbitration is a commercial dispute of a Specified Value and-
(1) If such arbitration is an international commercial arbitration, all applications
or appeals arising out of such arbitration under the provisions of the
Arbitration and Conciliation Act, 1996 (26 of 1996) that have been filed in a
High Court, shall be heard and disposed of by the Commercial Division where
such Commercial Division has been constituted in such High Court.
(2) If such arbitration is other than an international commercial arbitration, all
applications or appeals arising out of such arbitration under the provisions of
the Arbitration and Conciliation Act, 1996 (26 of 1996) that have been filed on
the original side of the High Court, shall be heard and disposed of by the
Commercial Division where such Commercial Division has been constituted in
such High Court.
(3) If such arbitration is other than an international commercial arbitration, all
applications or appeals arising out of such arbitration under the provisions of
the Arbitration and Conciliation Act, 1996 (26 of 1996) that would ordinarily
lie before any principal civil court of original jurisdiction in a district (not being
a High Court) shall be filed in, and heard and disposed of by the Commercial
Court exercising territorial jurisdiction over such arbitration where such
Commercial Court has been constituted.”
“Section 11 - Bar of jurisdiction of Commercial Courts and Commercial
Divisions- Notwithstanding anything contained in this Act, a Commercial Court or a
Commercial Division shall not entertain or decide any suit, application or
proceedings relating to any commercial dispute in respect of which the jurisdiction
of the civil court is either expressly or impliedly barred under any other law for the
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time being in force.”
“Section 13 - Appeals from decrees of Commercial Courts and Commercial
Divisions-(1) Any person aggrieved by the decision of the Commercial Court or
Commercial Division of a High Court may appeal to the Commercial Appellate
Division of that High Court within a period of sixty days from the date of judgment
or order, as the case may be:
Provided that an appeal shall lie from such orders passed by a Commercial
Division or a Commercial Court that are specifically enumerated under Order
XLIII of the Code of Civil Procedure, 1908 (5 of 1908) as amended by this Act
and section 37 of the Arbitration and Conciliation Act, 1996 (26 of 1996).
(2) Notwithstanding anything contained in any other law for the time being in
force or Letters Patent of a High Court, no appeal shall lie from any order or
decree of a Commercial Division or Commercial Court otherwise than in
accordance with the provisions of this Act.”
(emphasis added)
“Section 14 - Expeditious disposal of appeals- The Commercial Appellate
Division shall endeavour to dispose of appeals filed before it within a period of six
months from the date of filing of such appeal.”
“Section 15 - Transfer of pending cases-(1) All suits and applications,
including applications under the Arbitration and Conciliation Act, 1996 (26 of
1996), relating to a commercial dispute of a Specified Value pending in a High
Court where a Commercial Division has been constituted, shall be transferred to the
Commercial Division.
(2) All suits and applications, including applications under the Arbitration and
Conciliation Act, 1996 (26 of 1996), relating to a commercial dispute of a Specified
Value pending in any civil court in any district or area in respect of which a
Commercial Court has been constituted, shall be transferred to such Commercial
Court:
Provided that no suit or application where the final judgment has been
reserved by the Court prior to the constitution of the Commercial Division or the
Commercial Court shall be transferred either under sub-section (1) or sub-
section (2).
(3) Where any suit or application, including an application under the Arbitration
and Conciliation Act, 1996 (26 of 1996), relating to a commercial dispute of
Specified Value shall stand transferred to the Commercial Division or Commercial
Court under sub-section (1) or sub-section (2), the provisions of this Act shall apply
to those procedures that were not complete at the time of transfer.
(4) The Commercial Division or Commercial Court, as the case may be, may hold
case management hearings in respect of such transferred suit or application in
order to prescribe new timelines or issue such further directions as may be
necessary for a speedy and efficacious disposal of such suit or application in
accordance with Order XIV-A of the Code of Civil Procedure, 1908 (5 of 1908):
Provided that the proviso to sub-rule (1) of Rule 1 of Order V of the Code of
Civil Procedure, 1908 (5 of 1908) shall not apply to such transferred suit or
application and the court may, in its discretion, prescribe a new time period
within which the written statement shall be filed.
(5) In the event that such suit or application is not transferred in the manner
specified in sub-section (1), sub-section (2) or sub-section (3), the Commercial
Appellate Division of the High Court may, on the application of any of the parties to
the suit, withdraw such suit or application from the court before which it is pending
and transfer the same for trial or disposal to the Commercial Division or Commercial
Court, as the case may be, having territorial jurisdiction over such suit, and such
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order of transfer shall be final and binding.”

“Section 21 - Act to have overriding effect- Save as otherwise provided, the
provisions of this Act shall have effect, notwithstanding anything inconsistent
therewith contained in any other law for the time being in force or in any
instrument having effect by virtue of any law for the time being in force other than
this Act.”
21. By Section 16 of the Commercial Courts Act, existing CPC have been amended
through the Schedule. As relevant, extracted newly inserted Order XIII-A:
“ORDER XIII-A
Summary Judgment
1. Scope of and classes of suits to which this Order applies.- (1) This Order sets
out the procedure by which Courts may decide a claim pertaining to any
Commercial Dispute without recording oral evidence.
(2) For the purposes of this Order, the word “claim” shall include-
(a) part of a claim;
(b) any particular question on which the claim (whether in whole or in part)
depends; or
(c) a counterclaim, as the case may be.
(3) Notwithstanding anything to the contrary, an application for summary
judgment under this Order shall not be made in a suit in respect of any Commercial
Dispute that is originally filed as a summary suit under Order XXXVII.” (emphasis
added)
Summary Suit and unamended CPC-
22. The Commercial Suits/Applications on the Original Side of the Bombay High
Court are governed by the CPC read with Bombay High Court (Original Side) Rules,
1980 as amended from time to time and so also the Summary Suits as contemplated
under Order XXXVII of CPC so filed within the jurisdiction of Bombay High Court
(Original Side). It is always subject to the territorial and pecuniary jurisdiction. The
pecuniary jurisdiction had undergone a change and accordingly
Suits/Petitions/Applications were transferred and/or re-transferred to the concerned
City Civil Court/Small Causes Courts based upon the valuation of the
Suits/applications.
If order=Judgment-under CPC-
23. An ordinary Appeal from Judgment/Order passed by the learned Single Judge of
the Bombay High Court on the Original Side, apart from the provisions of the CPC is
governed by the Letters Patent Act, subject to clauses 12 to 15. In the decisions in
Shah Babulal Khimji v. Jayaben D. Kania1 and Midnapore Peoples' Co-op. Bank Ltd. v.
Chunilal Nanda,2 the Supreme Court observed as under:
“82. We now proceed to deal with the main controversy as to what is the true
scope, meaning and purport of the word ‘judgment’ used in Clause 15 of the Letters
Patent. Numerous authorities on both sides were cited before us in the course of the
very able arguments advanced by counsels for the parties and it appears that there
are three leading judgments which have spelt out certain tests to determine as to
when an order passed by a Trial Judge can be said to be a ‘judgment’ within the
meaning of. clause 15 of the Letters Patent. A very narrow view on this point was
taken by a Division Bench of the Calcutta High Court in the case of The Justice of
the Peace for Calcutta (supra) where Sir Couch, C.J. On an interpretation of Clause
15 of the Letters Patent observed thus:-
We think that “judgment” in clause 15 means a decision which affects the
merits of the question between the parties by determining some right or liability.
It may be either final, or preliminary, or interlocutory, the difference between
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them being that a final judgment determines the whole cause or suit, and a
preliminary or interlocutory judgment determines only a part of it, leaving other
matters to be determined.
“113 ……….(3) Intermediary or Interlocutory judgment-Most of the interlocutory
orders which contain the quality of finality are clearly specified in clauses (a) to (w)
of Order 43 Rule 1 and have already been held by us to be judgments within the
meaning of the Letters Patent and, therefore, appealable. There may also be
interlocutory orders which are not covered by Order 43 Rule 1 but which also
possess the characteristics and trappings of finality in that, the orders may
adversely affect a valuable right of the party or decide an important aspect of the
trial in an ancillary proceeding. Before such an order can be a judgment the adverse
effect on the party concerned must be direct and immediate rather than indirect or
remote. For instance, where the Trial Judge in a suit under Order 37 of the Code of
Civil Procedure refuses the defendant leave to defend the suit, the order directly
affects the defendant because he loses a valuable right to defend the suit and his
remedy is confined only to contest the plaintiff's case on his own evidence without
being given a chance to rebut that evidence. As such an order vitally affects a
valuable right of the defendant it will undoubtedly be treated as a judgment within
the meaning of the Letters Patent so as to be appealable to a larger Bench.”…….
24. The Supreme Court in Midnapore Peoples' Co.op Bank Ltd. (Supra) has
observed in para 16 as under:-
“16. Interim orders/interlocutory orders passed during the pendency of a case,
fall under one or the other of the following categories:
(i) Orders which finally decide a question or issue in controversy in the main
case.
(ii) Orders which finally decide an issue which materially and directly affects the
final decision in the main case.
(iii) Orders which finally decide a collateral issue or question which is not the
subject matter of the main case.
(iv) Routine orders which are passed to facilitate the progress of the case till its
culmination in the final judgment.
(v) Orders which may cause some inconvenience or some prejudice to a party,
but which do not finally determine the rights and obligations of the parties.
The term ‘judgment’ occurring in Clause 15 of the Letters Patent will take into its
fold not only the judgments as defined in Section 2(9) CPC and orders enumerated
in Order 43 Rule 1 of CPC, but also other orders which, though may not finally and
conclusively determine the rights of parties with regard to all or any matters in
controversy, may have finality in regard to some collateral matter, which will affect
the vital and valuable rights and obligations of the parties. Interlocutory orders
which fall under categories (i) to (iii) above, are, therefore, ‘judgments’ for the
purpose of filing appeals under the Letters Patent. On the other hand, orders falling
under categories (iv) and (v) are not ‘judgments’ for purpose of filing appeals
provided under the Letters Patent.”
(Emphasis added)
The scheme of Commercial Courts Act-
25. The terms “Commercial Court”, “Commercial Division” and “Commercial
Appellate Division” have been defined under Sections 3, 4 and 5 of the Commercial
Courts Act. The constitution of the Commercial Courts is by the State Government
which are at district level in territories other than the territories where the High Court
has ordinary original civil jurisdiction. The constitution by the State Government is
subject to the condition of consultation with the concerned High Court by publishing a
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notification in the Official Gazette specifying the local limits of jurisdiction of the
Commercial Courts. It is also subject to nomination of one or more persons having
experience in dealing with commercial disputes to be a Judge or Judges of Commercial
Courts.
26. The constitution of Commercial Division of High Court is also subject to the
order of Chief Justice of High Court consisting of Commercial Division, having one or
more Branches consisting of a Hon'ble Judge/Judges. The Chief Justice of High Court,
by the nomination, has appointed the Judges of High Court who have experience in
dealing with the commercial disputes. The constitution of Commercial Appellate
Division by the nomination, is also by the order of Chief Justice of the High Court,
keeping in mind to nominate such Judges of High Court, who have experience in
dealing with the commercial disputes.
27. Chapter II of the Commercial Courts Act deals with the constitution of
Commercial Courts and Commercial Divisions and Commercial Appellate Divisions at
various levels/courts. There is no issue that Commercial Courts and Commercial
Divisions and Commercial Appellate Divisions are required to be constituted as per the
prescribed provisions so referred above. The order/nomination by the Chief Justice in
case of Commercial Division and the Commercial Appellate Division is thus sufficient
so far as the constitution of such Divisions under the Commercial Courts Act. The
requirement of notification/order by the State Government in consultation with the
Chief Justice is also the requirement of the Act for the constitution of Commercial
Courts in the district area/territories. So far as the Government of Maharashtra is
concerned, a notification dated 13 June 2016 was issued under Section 3(1)
constituting a Commercial Court in each district and in some places, Judges have been
appointed to preside over the Commercial Court by appointment order dated 21 July
2016. As noted, the Commercial Divisions of the Bombay High Court have been
constituted from time to time by nomination and so also the Commercial Appellate
Divisions of High Court as contemplated under Sections 4 and 5 of The Commercial
Courts Act.
28. In view of Section 2(1)(c) of Commercial Courts Act, in view of definition of
“commercial dispute” and “specified value” and as the summary suits fall within the
definition of “commercial dispute” and the valuation of the subject matter exceeds one
crore, the provisions of Commercial Courts Act would apply to such Suits, Petitions and
Applications and the Appeal in question. There is no issue on this.
29. Section 6 empowers the Commercial Court to try and hear all suits and
applications relating to a commercial dispute based upon the valuation so recorded
above which is subject to territorial jurisdiction. All suits and applications relating to a
commercial dispute where the subject matter exceeds Rupees one crore and which are
pending in any Civil Court in any District shall be transferred to the Commercial Courts
so constituted is the mandate of Section 15(2) of the Commercial Courts Act. Section
7 empowers “Commercial Division” of High Court to hear “All suits and applications
relating to commercial disputes of the stated value of the subject matter which are
filed in High Court having ordinary original civil jurisdiction”. This includes all
suits/applications filed before the commencement of the Commercial Courts
Act/Ordinance and even the constitution of Commercial Division. This also includes all
fresh suits, applications filed after the commencement of the Act and/or constitution of
the Commercial Division provided it should be ‘commercial disputes’, having the
valuation of the subject matter exceeding one crore. The mandate of Section 15(1) of
the Commercial Courts Act is applicable even for all suits and applications pending in
the High Court where commercial Division has been constituted - It shall be
transferred to the Commercial Division of the High Court. It is, therefore, clear that
Commercial Courts Act, in view of above provisions so reproduced is made applicable
retrospectively and would take into its ambit all pending suits, petitions and
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applications relating to commercial dispute of the specified value and specified

disputes. Therefore, all such suits, petitions and applications pending or fresh, will be
governed by the Commercial Courts Act with effect from 23.10.2015. This is also clear,
therefore, that all the rights in regard to pending suits, petitions and applications shall
be governed by the Commercial Courts Act, once transferred.
The Commercial Court Appeal against Decision/Judgment/order/decree-
30. The jurisdiction of the Commercial Appellate Division as provided in Chapter II
and specifically Section 13 provides that the Commercial Appellate Division of a High
Court has jurisdiction to hear Appeals from decisions, judgments, orders or decrees
passed by the Commercial Division of that High Court or by Commercial Courts within
the local limits of the jurisdiction of the High Court.
31. After giving due consideration to the provisions of Section 13(1) read with
Section 13(2) it is apparent that it provides that Appeals will lie to the Commercial
Appellate Division against the decision of the Commercial Court or Commercial
Division. The words “decision”, “Judgment”, “Order” “decree” as such are not defined.
It is defined and elaborated under the CPC. From Section 13(1) it follows that it
includes “judgment” or “order” and read with Sections 8, 13(2) it includes “decree” of
the Commercial Court or Commercial Division. However, it is specifically mentioned in
proviso to Section 13(1) that such orders as enumerated in Order XLIII of CPC should
be the order against which an Appeal against order is maintainable under Section 13.
Further the proviso contemplates that an Appeal would lie against appealable order
under Section 37 of the Arbitration and Conciliation Act, 1996. Section 13(2) has
restricted the Appeals even for Section 13 of the Commercial Courts Act by rider that
“no Appeal shall lie from any order or decree of a Commercial Division or Commercial
Court other than in accordance with the provisions of this Act.”. This is also with
“notwithstanding” clause under Section 13(2) whereby, it is mandated that
“notwithstanding anything contained in any other law for the time being in force or
Letters Patent of High Court”.
32. Therefore, taking into consideration the overall provisions and intent of Section
13(1)and (2) which provides the specific orders against which an Appeal can be filed
in such commercial matters. The Appeal under Section 13 is maintainable, once the
Suits, Petitions Applications and Appeals are transferred and treated as commercial
disputes having specified value, where the learned Commercial Division Judge has
taken the decision and/or passed the “judgment” and/or “order” or “decree”. It is
relevant to note that under Section 21 of the Commercial Courts Act, it is mandated
and reinforced that the provisions of the Commercial Courts Act will prevail over the
provisions of other Act. Therefore, an Appeal under Section 13 of the Commercial
Courts Act is maintainable against the decision/judgment/order or decree, if it falls
within the ambit of the provisions of the Commercial Courts Act. This includes that the
subject matter must be commercial dispute having valuation of more than one crore
and falls within the territorial and pecuniary jurisdiction of the respective Court and/or
Division and/or subject to the specific provisions like the Arbitration and Conciliation
Act, read with the special statutes and the provisions so required, referred under
umbrella of “commercial dispute” so defined.
33. Appeal against any final decision include the judgment so passed by the
Commercial Court and/or Commercial Division, the proviso to Section 13(1) will not be
applicable to such decision/judgment, as the proviso refers to “orders”. The reference
to “orders” in the opening portion of Section 13(1) would relate to the application of
the proviso to sub-section (1). However, the opening portion of sub-section (1) (words
prior to the proviso) clearly use the words “decision”, “judgment” and “order”.
Therefore, the ambit of this part of sub-section (1) is quite broader when it comes to
appeals arising out of orders other than the category of orders falling under order XLIII
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of the CPC. Therefore, an Appeal under Section 13(1), even if there is an order, but
which has a tinge or colour of judgment as laid down by the Hon'ble Supreme Court in
Shah Babulal Khimji v. Jayaben D. Kania3 and Midnapore Peoples' Co-op. Bank Ltd.
(supra), the Appeal under Section 13 against such order being a “judgment” within
the meaning of CPC, is maintainable. The provisions of CPC (amended and
unamended) are applicable to the Commercial Courts Act's proceedings. The term
“Judgment” was not even defined under the Letters Patent Act. In the summary suit,
though it is an interlocutory order of granting Defendants conditional leave to defend
such summary suit, as it directly affects and loses the valuable rights of the Defendant
without giving full opportunity and as transferred and as heard by the learned
Commercial Division Bench/Judge, the Commercial Appeal against such “Judgment” is
maintainable. Therefore, we are of the view that there is no reason to hold that the
Commercial Appeal as filed is not maintainable.
“Summary Suit” and “Summary Judgment”-
34. The conceptual position of “summary suit” as contemplated under Order
XXXVII of CPC and its specific provisions are governed as per the original provisions of
CPC. The amended CPC, in view of Section 16 of the Commercial Courts Act inserted
the provision for a “summary judgment”, through Order XIII-A which is made
applicable to the classes of Suits (commercial suits) which required to be decided by
the Commercial Division/Court. It prescribes the procedure and stages for application
for summary judgment. This also includes and provides the powers of a Commercial
Judge to pass conditional order including for evidence for hearing of summary
judgment. We are concerned with Order XIII-A, Rule 1(3) of CPC, whereby it is
specifically provided “notwithstanding anything to the contrary, “an application” for
summary judgment under this Order shall not be made in a Suit in respect of any
commercial disputes that is originally filed as a summary suit under Order XXXVII.”.
Therefore, once the summary suit as originally filed, prior to the commencement of the
and as now transferred, being commercial dispute matter, the original procedure as
provided under Order XXXVII shall be applicable to such summary suits. The parties
are not entitled to prayer for summary judgment under XIII-A in view of the specific
provision so referred above. This also means that the judgments and the issues so
decided in summary suit shall for all purposes be governed by the CPC, even after
such suits are transferred as commercial suits. The Commercial Division Judge is
required to follow the original C.P.C. and is required to keep in mind the position in
law revolving around all the facets of summary suits. The provisions of Section 13,
therefore, is required to be interpreted and/or considered accordingly, when any
decision is given by the Commercial Division/Court in such summary suit. The proviso
to Section 13(1), will not affect the maintainability of such Appeal so filed against
such order/judgment passed by the Commercial Division/Court in such summary suit.
35. The submission that Section 13 proviso has extinguished, expressly and/or by
necessary intentment the Appeal against the order passed by the Commercial Judge in
summary suit granting the Defendant conditional leave to defend a summary suit is
unacceptable. Section 13 itself contemplates that an Appeal is maintainable against
the decision/judgment or order which has effect of “judgment”, though it falls outside
the purview of Order XLIII as observed above.
The right of appeal is creation of statute-
36. It is settled that a right of Appeal is not a matter of procedure, but it is a
matter of a substantive right which accrues to the litigant and as exists on the date of
suit being instituted (see The Constitutional Bench decision in Garikapati Veeraya v. N.
Subbiah Choudhry4 , para 23) Such right of Appeal is governed by the law prevailing at
the date of the institution of the suit or proceedings and not by the law that prevails at
the date of its decision or at the date of filing of the Appeal. It is equally settled that a
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vested right of Appeal is not absolute; and that it can in fact be abrogated either
explicitly or by implicit intendment. [Kamal Kumar Dutta v. Ruby General Hospital5 ].
The Commercial Courts Act provides for an Appeal against the decision, judgment and
order so referred above. An Appeal is available if the commercial suit/dispute is dealt
with by the Commercial Division/Commercial Court and passes order/judgment and/or
take decision. This statutory Appeal as provided, therefore, cannot be taken away
notwithstanding anything contained in any other law for the time being in force or
Letters Patent of a High Court [Section 13(2)]. The Commercial Courts Act or special
Statute, if empowers, the Appellate Division Court to deal with the Appeal against the
Judgment/order passed by the Commercial Division or the Commercial Court, the bar
so submitted of proviso to Section 13(1) is not applicable in each and every matter
specifically when the subject matters are commercial disputes as defined under the
Commercial Courts Act and are also governed by the Special Act/Statute other than
the CPC. The specific provisions/Statute/Act will prevail as substantial rights, if are
created over the provisions of Order XLIII CPC, as provided in proviso to Section 13(1)
of the Commercial Courts Act.
Filing of Appeal under Section 13 of the Commercial Courts Act, cannot be occluded-
37. Section 13 Scheme itself provides Appeal against decision which includes
judgment/order passed by the Commercial Division/Court. There is no provision of
revision against the interlocutory order in view of bar of Section 8. Section 8 further
clarifies that only Appeal against such order is available subject to Section 13 proviso.
Even the issue of jurisdiction or such challenge will be subject to Section 13 of the
Commercial Courts Act. Therefore, the aggrieved parties have no option but to file
Appeal against the decision/order. The Appellate Court, however, may or may not
entertain appeal against the order or interlocutory order, in view of proviso to Section
13(1). But filing of Appeal under Section 13, in our view, cannot be occluded. The
Appeal against any decision of any Commercial Division/Court is maintainable. To
entertain or not is the Appellate Court's power and the jurisdiction depends upon the
facts and circumstances of the case.
The effect of not permitting to file the Commercial Appeal, in such matters-
38. Another factor is, if such Appeals are not permitted, the aggrieved parties shall
have no option but to invoke ordinary jurisdiction of the High Court or Court to
challenge the interlocutory order or order though the decision is by the Commercial
Division/Court, as commercial disputes are transferred and governed by the
Commercial Courts Act for all the purposes. Such dichotomy, in our view, is surely not
the intention of the legislature as followed from a cumulative reading of the various
provisions as noted by us. The filing of such Commercial Appeal by the party in the
ordinary Court, except where suit/application, valuation is less than one crore,
therefore, is not what is contemplated. It will frustrate the ambit and object of the
Commercial Courts Act.
The commercial disputes of specified valued shall be governed by the Commercial Act
only-
39. There is no scope to any authority, not to transfer the commercial suits, having
one crore and above valuation, for the purpose of pecuniary jurisdiction under the
Commercial Courts Act, in case of a commercial dispute. The State Government needs
to take steps as contemplated under Sections 19 and 20 of the Commercial Courts
Act. All and every concerned authority are bound to aid and assist to give effect to
these provisions to all the pending Suits/Applications, to achieve the object of the
Commercial Courts Act. All are bound by the provisions, including amended CPC to
expedite the pending Suits filed prior or post the Commercial Courts Act. The Appeals
are also expedited by the provisions so also pending Arbitration Petitions/Appeals as
specified, though filed prior to the enforcement of the Commercial Courts Act. Sections
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10, 13 and 15 deal with the pending Arbitration matters, including Appeal under
Section 37 of the Arbitration and Conciliation Act. The Supreme Court in a recent
decision in Arun Dev Upadhyaya v. Integrated Sales Service Ltd.6 , now has expanded
and included even the Appeal under Section 50 of the Arbitral Act in the facts of the
case. It needs to be subject to valuation of the Suit/Appeal.
40. We are also inclined to observe that the vested right of Appeal is not taken
away by the Commercial Courts Act. However, it is subject to Section 13 so recorded
above and/or Section 13 in no manner takes away and/or extinguishes right of Appeal
in pending summary suits which are transferred and dealt with by the Commercial
Division/Court.
41. Having once observed that the Appeal under Section 13 of the Commercial
Courts Act is maintainable, we are dealing with the merits of the matters on the facts
and in the background already reflected/mentioned in the initial paras.
42. The background of the litigations between the parties is relevant for
consideration of this Appeal on merits.
43. The Respondent (Plaintiff) is a Company incorporated under the Companies Act,
1956 and is a Debenture Trustee of the debentures issued to Vinca Developer Private
Limited (“Vinca”) by Amazia Developers Private Limited (“Amazia”) and Rubix Trading
Private Limited (“Rubix”). Amazia and Rubix are wholly owned subsidiaries of Vinca.
The Appellant (Defendant) and its individual promoters collectively own 90 per cent
shareholding in Vinca. Nederlandse Financierings - Maatschappiji Voor
Ontwikkelingslanden N.V. (“FMO”) is a Corporation constituted under the Laws of
Netherlands. FMO holds 10 per cent shareholding in Vinca. FMO also holds 3
Compulsorily Convertible Debentures (CCDs) issued by Vinca. The said three CCDs
were convertible within a period of 60 months from December 2009. Upon such
conversion, FMO would hold 90% shareholding in Vinca. The investment made by FMO
in Vinca in the form of three CCDs was used by Vinca to purchase Optionally
Convertible Debentures (“OPCDs”) issued by Amazia and Rubix. In respect of the
OPCDs, a Debenture Subscription and Debenture Trust cum Mortgage Deed was
executed on 1 December 2009 between Amazia, the Defendant and the Plaintiff.
Similarly in respect of the OPCDs issued by Rubix, a Debenture Subscription and
Debenture Trust cum Mortgage Deed dated 1 December 2009 was executed between
Rubix, the Defendant and the Plaintiff as amended by OPCD Amendment Agreement
dated 8 September 2010. The aforesaid deeds shall hereinafter be collectively referred
to as “the Debenture Trust Deeds” (DTDs). In respect of the liability arising under
OPCDs, the Defendant executed a Deed of Corporate Guarantee dated 9 December
2009 in favour of the Plaintiff, (the Guarantee).
44. For the purpose of the present Appeal, the case of the Respondent-Plaintiff is as
under:-On 1 December 2009, Facility Agreement was executed between inter alia
Rubix Trading Private Limited (as Borrower), Deutsche Investments India Private
Limited (as Lender), the Respondent (Plaintiff) (as Security Trustee) and the Appellant
-Hubton (Defendant) (as Confirming Party), DIIPL has provided Rubix with a loan
facility of Rs. 23,50,00,000/- (Rupees Twenty Three Crores and Fifty Lakhs only). On 9
December 2009, the Defendant (as Guarantor/Surety) has executed a Deed of
Guarantee cum Mortgage and under which the Defendant has inter alia agreed to
stand surety/guarantor and provide guarantee on behalf of Rubix in favour of the
Plaintiff for the benefit of DIIPL on the terms and conditions more particularly set out
therein. On 22 January 2010, the said facility was disbursed to Rubix by DIIPL. On 22
April 2012, Rubix was liable to pay interest on the facility each quarter. However,
Rubix defaulted in payment of interest on the facility since 22 April 2012. On 5 March
2013, Rubix made part payment of Rs. 42,54,745/-.
45. The Respondent-IDBI (Plaintiff) filed Summary Suit No. 520/2013 on 16 May
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2013 against the Defendant for recovery of dues under the said Guarantee. Prior to the
filing of the Suit, the Respondent (Plaintiff) (IDBI) on 10 May 2013, filed Company
Petition No. 644 of 2013 seeking winding up of the Defendant on the ground that the
Defendant has failed to comply with the statutory notice to pay the amount under the
guarantee. On 12 February 2014, the Respondent-IDBI (Plaintiff) filed Summary Suit
No. 480 of 2014 for recovery of the back end coupon dues payable under the said
guarantee which amount was not included in the above summary Suit. The Defendant
(Hubton) has filed its affidavit in the Summons for Judgment raising several
contentions. The Plaintiff too has filed affidavits dealing with the contentions raised by
the Defendant. An additional affidavit is filed on behalf of the Plaintiff dated 4 July
2014 in Company Petition No. 644 of 2013 bringing on record the various facts.
46. In view of the aforesaid defaults on the part of Rubix and the Defendant, DIIPL
vide its letter dated 5 June 2013, cancelled the facility with immediate effect and
declared that all of the facility, along with accrued interest thereon were immediately
due and payable. On 8 June 2013, the Advocates for Rubix sent DIIPL a holding reply.
On 9 June 2013, in the meantime, considering that Rubix had not fulfilled its
obligations under the facility Agreement and considering that Rubix failed and/or
neglected to repay the amounts demanded under the Recall Notice, the Plaintiff was
constrained to issue a Demand Certificate to the Defendant for the enforcement of the
Guarantee, in terms of the Deed of Guarantee.
47. Rubix's aforesaid holding reply was followed by a further reply dated 18 July
2013, as stated, false, baseless and wholly untenable allegations in its defence. On 8
August 2013, DIIPL vide their letter replied to Rubix's letter dated 18 July 2013.
Despite repeated requests and reminders and post several meetings and discussions,
the Defendant and/or Rubix have failed and/or neglected to repay the Facility along
with all amounts due and/or accrued thereunder including interest and default interest
since 23 April 2012. In view thereof, on 14 August 2014, DIIPL was constrained to
issue a supplementary recall notice to Rubix. On 19 August 2014, the Plaintiff (IDBI)
issued supplementary Demand Certificate to the Defendant (Hubton) for the
enforcement of the Guarantee, in terms of the Deed of Guarantee. No reply has been
received to the aforementioned supplementary recall notice and supplementary
demand certificate. Hence the summary suit and summons for Judgment No. 39/2013.
48. The Single Judge (Coram:- S.J. Kathawalla, J.) on 8 May 2015 in Summons for
Judgment No. 39 of 2013 in Summary Suit No. 520 of 2013 has passed the following
order:-
“42. In the circumstances I am of the view that the Defendant has raised triable
issues which require adjudication on further evidence at the time of final disposal of
the suit. Hence the following order:
(i) Unconditional leave is granted to the Defendant to defend the above suit;
(ii) The suit is transferred to the list of commercial causes and the Defendant is
directed to file its written statement on or before 15th June, 2015;
(iii) The hearing of the suit is expedited and the Court will endeavour to dispose
of the suit within a period of one year from the date of this order. It is clarified
that the Suit shall be decided without being influenced by any of the
observations made in the present order;
(iv) Place the suit for framing of issues on 29th June, 2015. The Summons for
Judgment is accordingly disposed of.”
49. The Respondent-IDBI's (plaintiff's) case in Summons for Judgment No. 111 of
2014 in Summary Suit No. 776 of 2014, is as under:-
The Respondent's (Plaintiff's) case is that the Deed of Guarantee executed by the
Appellant (Defendant) relates to the following three separate and distinct
transactions:-
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(a) Repayment of the amount of Rs. 23.50 Crores loaned by DIIPL to Rubix
under the Facility Agreement;
(b) Due performance and repayment by Amazia, of its OPCDs of Rs. 150 Crores
issued to Vinca on terms and conditions mentioned in Amazia OPCD
Subscription and Debenture Trust Deed of 1 December 2009; and
(c) Due performance and repayment by Rubix of OPCDs totaling Rs. 268 Crores
issued and allotted to Vinca on terms and conditions mentioned in Rubix
OPCD Subscription and Debenture Trust Deed of 1 December 2009.
50. Amazia and Rubix transactions referred to in (b) and (c) above involved Vinca
which was a 100% holding company of both Amazia and Rubix. There was a separate
Summary Suit filed by the Plaintiff herein for enforcement of the guarantee given by
the Defendant herein for those two transactions. It was the case of the Defendant in
that suit that the OPCDs reflected investments made by FMO (referred to above),
though ostensibly in Vinca, actually meant for Amazia and Rubix operating in the
housing sector and what the transaction really contemplated was FDI with
assured/fixed returns in housing sector, i.e. in Amazia and Rubix, through a nominal
recipient, Vinca. On a Summons for Judgment taken out in that suit, a learned Single
Judge came to the conclusion that the factual matrix and transaction documents prima
facie established that the transaction of routing FDI through the newly interposed
Vinca was a colourable device and was structured to enable FMO to secure repayment
of FDI at a fixed rate of return, thus contrary to the FDI policy and statutory FEMA
regulations and thus, opposed to public policy and illegal. The learned Judge held that
the Deed of Guarantee issued by Vinca being a part of this structure was also prima
facie unenforceable. (The learned Judge (S.J. Kathawalla, J), accordingly, granted
unconditional leave to defend on 8 May 2015).
51. It is, however, the Respondent-IDBI (Plaintiff's) case in the present summary
suit that the Deed of Guarantee insofar as it relates to the DIPPL Loan (forming part of
(a) above), which is the subject matter of the present suit, is on the basis of the
Facility Agreement which is in fact a plain vanilla Indian Rupee loan provided by the
Plaintiff, an Indian registered Non-Banking Finance Company to Rubix, an Indian
Entity, to which no FDI law or policy applies. It is submitted that though this
guarantee is contained in the same document as the guarantee provided for Amazia
and Rubix OPCDs, it has nothing to do with either of these two transactions. It is
submitted that it is an altogether separate transaction and in any event, severable
from the other transactions.
52. The defence of the Appellant-Original Defendant (Hubtown) was noted in para 6
and 12 of the said Summons for Judgment, which reads thus:-
“The Defendant disputes this case. Mr. Chinoy, learned Senior Counsel appearing
for the Defendant, relies on paras 8(iv), (x), (xiii), (xxi) and (xxiv), and paras 15
and 16 of the affidavit in reply and paras 4, 9, 14, 18, 20, 22, 24 and 25 of the
affidavit in rejoinder and argues that the circumstances reflected therein show that
these three transactions were related and formed part of one whole transaction. The
gist of his contentions is this: Deutsche Bank A.G. agreed to act as an arranger of
funds to be invested in a group company/companies of the Defendant to the tune of
USD 60 million (with an option to increase it to USD 90 to 100 million) at an IRR of
upto 20% per annum. (The OPCDs of Rubix and Amazia were part of this
investment.) The consideration payable to Deutsche Bank was a stipulated arranger
fee. The foreign investor identified by Deutsche Bank (i.e. FMO) was willing to
invest around USD 90 to 100 million at a lower IRR (i.e. 14.75% p.a.). As a result,
Deutsche Bank asked for an increased arranger fee. The Defendant and its group
companies being in a desperate need of funds, had to give in to this demand and
were constrained to pay revised arranger fee. Deutsche Bank, in turn, agreed to
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reroute a part of the revised arranger fee as a loan to the Defendant or any of its
group companies. The loan of Rs. 23.50 extended by DIIPL, at a far higher rate of
interest, was a part of that commitment and thus, a part and parcel of the illegal
structuring undertaken by Deutsche Bank. The Defendant submits that it was at the
instance of the foreign investor that the loan of Rs. 23.50 Crores was extended as
an “Indian leg of the structured transaction of the Foreign Investor along with
Deutsche Bank A.G….. inspite of the fact that Rubix was in no need of the additional
secured loan of Rs. 23,50,00,000/from DIIPL”. Relying on these facts, namely, of
increased arranger fees, proximity of the dates of the individual transactions and
common security documents, Mr. Chinoy submits that the transaction is one whole
and the DIIPL loan and the Deed of Guarantee insofar as it relates to that loan
cannot be separated from FDI brought into India in an illegal and impermissible
manner.”
“Learned Counsel for the Defendant relies on the analysis of the facts of the case
in the Plaintiff's suit for enforcement of guarantees in respect of Amazia and Rubix
OPCD transactions in IDBI Trusteeship Services Ltd. v. Hubtown Ltd.7 by the
Learned Judge (S.J. Kathawalla, J.), whilst dealing with the case of Videocon
Industries Limited v. Intesa Sanpaolo S.P.A.8 in support of his defence. In that case,
the learned Judge was considering the severability of the routing of FDI investment
in Amazia and Rubix through the newly interposed Vinca (as the nominal recipient
of FDI) and the guarantee given by the Defendant to ensure repayment of the FDI.
The learned Judge held them to be prima facie inseverable. Here, we are
considering the severability of the guarantee towards repayment of FDI and towards
repayment of the Indian loan, which is separate from the FDI transaction. The
observations dated 8 May 2015 of Kathawalla, J. in that case have no bearing on
this severability.”
53. The operative part of the impugned order dated 6 June 2006 passed in
Summons for Judgment No. 111 of 2014 in summary suit, is as under:-
“14 Accordingly, the Summons for Judgment is disposed of in terms of the
following order:-
(i) The Defendant is granted leave to defend on and subject to the condition of
depositing a sum of Rs. 33,55,16,946.85 in this Court within a period of
twelve weeks from today;
(ii) Upon such deposit being made, the suit shall be transferred to the list of
commercial causes;
(iii) The Defendant to file its Written Statement in the suit within twelve weeks
of making of the deposit;
(iv) The amount of deposit, if any, shall be invested by the Prothonotary & Senior
Master of this Court in a fixed deposit of a Nationalized Bank initially for a
period of two years and thereafter, to be renewed from time to time and to
abide by further orders that may be passed in the suit;
(v) The suit to come up on board for directions after twenty four weeks from
today.”
54. Hence, this Commercial Appeal filed on 12 July 2016.
The reasons for the reversal of the impugned order-
Two views on construction of documents-question of law-triable issue-
55. Admittedly, the findings given by the learned Single Judge on documents being
severable or unseverable, goes to the root of the interpretation and the construction of
the same documents and the related transactions. The contrary view so expressed by
the learned Judge in the impugned order (para 40 and 41), in view of the earlier
findings (para 39) itself require a consideration in the suit and more particularly when
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another learned Single Judge in Summary Suit No. 520 of 2013 (supra) has prima
facie held the document/guarantee is inseverable. In this position we are not
persuaded to accept that the ratio of the decision of the Supreme Court in B.O.I.
Finance Ltd. v. Custodian9 , and in Canbank Financial Services Ltd. v. The Custodian10
would be applicable to the facts in hand. Reasoning of the learned Single Judge, (S.J.
Kathawalla, J.) in order dated 8 May 2015, in para 37.2, 37.3 read thus-
“37.2 In the case in hand, I am prima facie of the view that the structure/device
of routing FMO's FDI amount of Rs. 418 crores to Amazia and Rubix through the
newly interposed Vinca (as the nominal recipient of the FDI) was a colourable
device structured only to enable FMO to secure repayment (through Vinca) of its
FDI amount and interest thereon at 14.75%, contrary to the statutory FEMA
Regulations and the FDI policy embodied therein, which only permit FDI investment
in townships/real estate development sector to be made in the form of equity
(including Compulsorily Convertible Debentures) and preclude any assured return. I
am also prima facie of the view that the Defendant's guarantee (which is the basis
of the Company Petition No. 644 of 2013) though ostensibly in favour of Vinca, an
Indian Company, was part of the aforesaid illegal structure/scheme and was given
to ensure that FMO received back its FDI amount with interest as aforesaid through
Vinca. The Guarantee was therefore part of the aforesaid illegal structures/scheme
and therefore prima facie illegal and unenforceable.
37.3 Further the question of the Defendant not being allowed to plead its own
wrong also does not arise in the facts of the present case. Through the present
Petition, the Plaintiff (who is admittedly acting at the instance of FMO/FMO's
nominees) is in effect seeking the assistance of this Court to enable/enforce
recovery by FMO of its FDI amount and interest thereon (through Vinca), contrary to
the provisions of the FEMA Regulations and FDI policy embodied therein. As has
been held by the Hon'ble Supreme Court in the case of Immami Appa Rao v. G.
Ramalingamurthi (supra), the Plaintiff who wants orders in his favour, is actually
seeking the active assistance of the Court to achieve what the law
prohibits/declares illegal and that is clearly and patently inconsistent with
public interest. Moreover, as has been held by the Supreme Court in the above
case, in such a case there can be no question of estoppel and the paramount
consideration of public interest requires that the plea be allowed to be raised
and tried.”
56. The defence so raised itself being the question of law, as the interpretation of
documents itself goes to the root of the transactions/contract and the claim based
upon it. In the present case, B.O.I. Finance Ltd. (Supra), as relied is not applicable on
facts and the laws. That was a case of ready forward contract. In the case in hand,
three documents and the transactions, of which two views of the learned Judges
unless decided finally in due trial, it is difficult to accept the case that the view taken
by the one learned Judge that transactions are sham and bogus and unseverable and
other Judge hold it to be severable, without trial and by overlooking the earlier
opinion, this itself is a triable issue. The Appellate Bench also may not decide such
issue on such question of law, considering the scope and purpose of law on order
XXXVII of the CPC, at this stage of the Summary Suit. It should be after final
Judgment. In the present case, the same documents are interlinked and
interconnected as observed by the earlier learned Judge, therefore, unless these
findings are set aside, the findings in the impugned order that those are severable just
cannot be accepted, without the trial. The case of misconstruction or interpretation of
all connected documents itself made out a case of good defence. It cannot be treated
as sham or bogus defence. The misinterpretation itself affects the rights and the
transaction/claim. Therefore, the construction of documents is always question of law
so is the position in case in hand. The distinction, therefore, at this stage, in summary
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proceedings like this, itself will not sufficient to deny the order of unconditional leave
as granted by one Judge on the basis of same documents. (Sir Chunilal V. Mehta and
sons Ltd. v. Century Spinning and Manufacturing Co. Ltd.11 and Hero Vinoth (Minor) v.
Seshammal12 )
Interpretation of documents and the nature of transactions-triable issue-
57. We have to consider the legal position in view of the contentions so raised by
the learned counsel appearing for the parties. The Apex Court in Smt. Krishnabai
Bhritar Ganpatrao Deshmukh v. Appasaheb Tuljaramarao Nimbalkar13 , while dealing
with the aspects of interpretation of any deed or documents, has held as under:-
“27. Secondly, there is ample authority for the proposition that when there is a
dispute in regard to the true character of a writing, evidence de hors the document
can be led to show that the writing was not the real nature of the transaction, but
was only an illusory, fictitious and colourable device which cloaked something else,
and that the apparent state of affairs was not the real state of affairs. [See Chandi
Prasad Singh v. Piari Bidi C.A. No. 75 of 1964, decided on 16-3-1966, and Bhagwan
Dayal v. Mst. Reoti Devi (supra)].
58. While dealing with the effect of various transactions, based upon the various
documents, the Court required to deal with and take into consideration every
connected transactions and the documents, to give total effect to the transactions by
treating them all as one document. The Apex Court in (S. Chattanatha Karayalar v.
The Central Bank of India Ltd.)14 has observed as under:-
3. ………. “The principle is well established that if the transaction is contained in
more than one document between the same parties they must be read and
interpreted together and they have the same legal effect for all purposes as if they
are one document. In Manks v. Whiteley 1912-1 Ch. 735 at p. 754, Moulton, L.J.
Stated:
“Where several deeds form part of one transaction and are contemporaneously
executed they have the same effect for all purposes such as are relevant to this
case as if they were one deed. Each is executed on the faith of all the others
being executed also and is intended to speak only as part of the one transaction,
and if one is seeking to make equities apply to the parties they must be equities
arising out of the transaction as a whole.”
Conditional or unconditional leave?
59. The law with regard to Order XXXVII, Rule 2 and 3 of CPC to grant or not to
grant conditional and/or unconditional leave is elaborated as under, by the Apex Court
in Mechelec Engineers & Manufacturers v. Basic Equipment Corporation15 -
“8. In Sm. Kiranmoyee Dassi v. Dr. J. Chatterjee (49 CWN 246, 253:AIR 1949
Cal 479), Das. J., after a comprehensive review of authorities on the subject, stated
the principles applicable to cases covered by order 17 C.P.C. in the form of the
following propositions (at p. 253):
(a) If the defendant satisfies the Court that he has a good defence to the claim
on its merits the plaintiff is not entitled to leave to sign judgment and the
defendant is entitled to unconditional leave to defend.
(b) If the defendant raises a triable issue indicating that he has a fair or bona
fide or reasonable defence although not a positively good defence the plaintiff
is not entitled to sign judgment and the Defendant is entitled to unconditional
leave to defend.
(c) If the defendant discloses such facts as may be deemed sufficient to entitle
him to defend, that is to say, although the affidavit does not positively and
immediately make it clear that he has a defence, yet, shows such a state of
facts as leads to the inference that at the trial of the action he may be able to
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establish a defence to the plaintiff's claim the Plaintiff is not entitled to
judgment and the defendant is entitled to leave to defend but in such a case
the court may in its discretion impose conditions as to the time or mode of
trial but not as to payment into court or furnishing security.
(d) If the defendant has no defence or the defence set up is illusory or sham or
practically moonshine then ordinarily the plaintiff is entitled to leave to sign
judgment and the defendant is not entitled to leave to defend.
(e) If the defendant has no defence or the defence is illusory or sham or
practically moonshine then although ordinarily the plaintiff is entitled to leave
to sign judgment, the court may protect the plaintiff by only allowing the
defence to proceed if the amount claimed is paid into court or otherwise
secured and give leave to the defendant on such condition, and thereby show
mercy to the defendant by enabling him to try to prove a defence.”
“9. The case before us certainly does not fall within the class (e) set out above. It
is only in that class of case that an imposition of the condition to deposit an amount
in Court before proceeding further is justifiable.”
60. The Apex Court in this regard has further reiterated above principle and on facts
as case was made out granted an unconditional leave. This makes the position of law
clear, which need to be kept in mind while granting and/or refusing leave to defend.
The case in hand, in our opinion, falls within the ambit of clauses (a) and (b) as
expressed in Mechelec Engineers & Manufacturers (supra). [Sunil Enterprises v. SBI
Commercial & International Bank Ltd.16 and State Bank of Saurashtra v. Ashit Shipping
Services (P) Ltd.17 , R. Savarna Prabhu v. Videocon Leasing and Industrial Finance
Limited18 ]
61. The learned Single Judge, S.G. Kathawalla, as recorded in earlier Suit filed by
the IDBI, dealt with the same documents and transactions between the parties and
has granted the conditional leave. Therefore, taking note of the reasons so given and
recorded, we see there is no case to discard these reasons by overlooking the above
basic principles of law. We have to keep in mind the basic principles so laid down,
while considering the present case/Appeal also. We have taken note of the facts and
circumstances, as well as the reasons given by the learned Single Judge, S.G.
Kathawalla, and the Supreme Court Judgments so referred above, interpreting the
transactions and the documents between the same parties and we are inclined to
observe that a sufficient case is made out by the Appellant that they have a good
defence to claim on its merits. This itself means, in the trial, they may be able to
establish the defence to the Plaintiff's claim therefore, the Appellant-Defendant, at this
stage, is entitled for the unconditional leave. The discretion so exercised and order so
passed by imposing condition while granting leave, is unsustainable in the facts and
the law and is liable to be interfered with.
62. Therefore, taking overall view of the matter, we are of the opinion that this is a
case where on merit, unconditional leave required to be granted to the Appellant on
similar line as granted by the learned Single Judge dated 8 May 2015.
63. Therefore, considering the totality of the matter, we are inclined to pass the
following order-
ORDER
a) Appeal filed under Section 13 of the Commercial Courts Act, is maintainable
against the order of grant of conditional leave directing the parties to furnish the
security/depositing the money in Summary Suit;
b) Impugned Judgment and order dated 6 June 2016 passed by the learned Single
Judge of the Commercial Division in Summons for Judgment No. 111 of 2011, is
quashed and set aside, as the Defendant has raised the triable issues, which
required adjudication on further evidence at the time of final disposal of the Suit;
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c) Unconditional leave is granted to the Defendant to defend the above suit;

d) The Suit is transferred to the list of commercial causes and the Defendant is
directed to file its written statement on or before 28 November 2016;
e) The hearing of the Suit is expedited. The learned Judge will endeavour to dispose
of the Suit within a period of one year from the date of this order.
f) Place the Suit for framing of issues on 9 January 2017;
g) The Appeal is accordingly disposed of.
h) In view of disposal of the Appeal itself, nothing survives in Notice of Motion
(Lodging) No. 2028 of 2016 and the same is also disposed of.
i) No costs.
———
1 (1981) 4 SCC 8
2 AIR 2006 SC 2190
3 (1981) 4 SCC 8
4 AIR 1957 SC 540
5 (2006) 7 SCC 613
6 2016 (9) SCALE 427

7 Summons for Judgment No. 39-13 in Summary Suit No. 520-13 decided on 8 May 15.
8 2014 SCC OnLine Bom 1276
9 (1997) 10 SCC 488

10 (2004) 8 SCC 355
11 AIR 1962 SC 1314
12 (2006) 5 SCC 545=AIR 2006 SC 2234

13
(1979) 4 SCC 60
14 AIR 1965 SC 1856
15 (1976) 4 SCC 687
16 (1998) 5 SCC 354
17 (2002) 4 SCC 736
18
(2013) 14 SCC 606
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2016 SCC Online Bom 9019 in The High Court of Bombay

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SCC Online Web Edition, Copyright © 2021

Page 1 Sunday, February 07, 2021

Commercial Appeal No. 7 of 2016

Hubtown Limited v. IDBI Trusteeship Service Limited

2016 SCC OnLine Bom 9019

In the High Court of Bombay

Hubtown Limited, incorporated under the Companies Act, 1956

(ii) export or import of merchandise or services;

order of transfer shall be final and binding.”

applications relating to commercial dispute of the specified value and specified

c) Unconditional leave is granted to the Defendant to defend the above suit;

6 2016 (9) SCALE 427

9 (1997) 10 SCC 488

12 (2006) 5 SCC 545=AIR 2006 SC 2234

© EBC Publishing Pvt.Ltd., Lucknow.

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