1 MNM IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CHAMBER SUMMONS NO.1768 OF 2009 IN EXECUTION APPLICATION NO.91 OF 2008 IN SUMMARY SUIT NO.3148 OF 2004 AND NOTICE OF MOTION NO.3965 OF 2009 IN SUIT NO. 3148 OF 2004 Deutsche bank ...Plaintiff Vs. Bizworld International & Ors. ...Defendants Mr.Sanjay Jain with Mr. Darshan Mehta i/b. M/s. Dhruve Liladhar & Co., for Plaintiff Mr. Rajneesh Agarwal with Mr. Amar Shilwant with Mr. Pankaj Jain i/b. P.D. Jain & Co., for Defendants CORAM : SMT. ROSHAN DALVI, J. DATED : 12TH APRIL, 2010 P.C. : 1. This Summary Suit has been filed by the Plaintiff for recovery of amounts on certain Promissory Notes executed by the Defendants in Mumbai in 2 favour of one PROYECTOS EINGENIERIA TEXTIL. S., L., who endorsed the same to the Plaintiff Bank. 2. The Writ of Summons having been served upon the Defendants, the Defendants entered appearance. The Plaintiff took out a Summons for Judgment. The Summons for Judgment was stated to have been served upon the Defendants. When it reached hearing on 19th June 2006 the Plaintiff appeared. None of the Defendants appeared. I am told that the board of that date showed the names of the Defendants. The order dated 19th June 2006 recites that Counsel for the Plaintiff stated to Court that the Summons for Judgment has been served on the Defendants. He undertook to file affidavit of service within one week from that date. Defendants have not filed any application for leave to defend in terms of the provisions of Order XXXVII of the C.P.C. Failure of the Defendant to make any application for leave to defend the Suit entitles the Plaintiff to judgment. The order further records that the Counsel for the Plaintiff was heard. Record was perused. Summons for Judgment was granted. Suit was decreed in terms of the prayer clause of the Suit. Refund of Court fee as per Rules was directed. 3. The order, therefore, proceeds on a footing that the Summons for Judgment was served. None appeared for the Defendants. The title of the plaint shows that there were 5 Defendants. 4 Defendants were sued as partners on behalf of Defendant No.1 Firm. All the 5 Defendants were required to be served, the Summons for Judgment as also the Writ of Summons. 3 4. Copy of Summons for Judgment was sought to be served under the letter of the Plaintiff’s Attorney dated 21st February 2006 sent by courier to the Defendants. The Defendant No.1 Firm had its registered office at Mumbai-400002. Defendants 2,3,4 and 5 resided at Mumbai-400 026. The courier receipt shows that Defendant No.2 was the Consignee. Paragraph 1 of the affidavit of service shows that this letter was dispatched to Defendant No.2 on behalf of Defendant No.1, a Partnership Firm and also on behalf of Defendants 3,4,and 5 along with the copies of Summons for Judgment and affidavit in support at his residential address at Mumbai-400026 through Vichare Courier Service Pvt. Ltd. The acknowledgment of service is annexed to the affidavit-in-support. The acknowledgment is made by one Bublal in Hindi. The Defendant No.2 is shown as a Consignee. Defendant No.2, as the partner of Defendant No.1, has, therefore, been sought to be served at his residential address on behalf of the firm as well as its partners. The affidavit of service states that the Defendant No.2 accepted service of the packets on 22nd February 2007 for himself, on behalf of the Firm as well as the other partners. 5. It may be mentioned that the affidavit of service shows that there were several packets sent. It also shows that there were several copies of Summons for Judgment and affidavit-in-support which was sent along with the letter. The courier receipt does not show receipt of several packets. It shows the receipt of only one packet. That packet is not addressed to any partner on behalf of the Defendant as an Agent of the Firm. That packet is addressed only to Defendant No.2. The statements in paragraphs 1 and 2 4 of the affidavit-in-support showing the service made in the plural by the word “packets” as well as the word “copies” of the Summons for Judgment and affidavit-in-support are not substantiated by the evidence showing service. 6. The Defendant who is served at his residential address would accept service either personally or through any member of his family. Bublal is certainly not a member of the family of Defendant No.2. Service effected at the partnership Firm’s office would be acknowledged by any employee of the Firm including a Peon. Such service could have been accepted by one Bublal. It is not accepted by Defendant No.2 as stated in paragraph 2 of the affidavit of service though the service is shown to be effected at the residential address of the partner in Mumbai-400026 and not at the address of the Firm in Mumbai-400 002. 7. Defendants contend that they do not know the signature of the signatory on the acknowledgment. If Defendant No.2 is served at his residential address as stated in the affidavit-in-support that contention stands to reason. 8. In any event the Counsel on behalf of the Plaintiff accepts that service upon Defendants 3,4 and 5 is not effected even if service upon Defendant No.2 on behalf of Defendant No.1 as well as for self is effected. Even these two services are not shown and service upon Defendant No.2 is not shown to be “duly accepted” by Defendant No.2 as stated in the affidavit of service. 5 9. The order of Justice D.K. Deshmukh was passed on the footing and upon the premise that the Defendant was served and that was mentioned by the Counsel of the Plaintiff. The order was passed because the Counsel further undertook to file the affidavit of service within one week from that day. Hence upon the footing that the Defendants were served with a copy of Summons for Judgment and the Defendants had not filed any affidavit in reply thereto disclosing their defence, the Summons for Judgment came to be made absolute and the order/judgment to be passed. 10.The Plaintiff did not file its affidavit of service within one week as undertaken by the Counsel of the Plaintiff. The Plaintiff filed the affidavit of service, which has been considered above, on 13th August 2007 in the office of the Prothonotary and Senior Master of this Court. That is not within one week, but after 7 weeks. The affidavit of service is not on the record of the proceedings in this Suit. That would be because it may be lying under objection in the Prothonotary office. A copy of the affidavit of service is, therefore, seen by the Court to understand the kind of service effected. It is seen that service is not properly effected as per the affidavit of service relied upon by the Plaintiff. 11.The Defendants contend that the decree is null and void because this Court had no territorial jurisdiction as well as inherent jurisdiction to try the Suit. 12.The Defendants’ Advocate relied upon the agreement between the Defendants and the aforesaid party PROYECTOS EINGENIERIA TEXTIL. 6 S., L., conferring jurisdiction upon the Courts in Madrid, Spain. 13.The agreement is marked Exhibit-A to the plaint. The agreement is not with the Plaintiff. The Plaintiff’s Suit is upon the Promissor Notes endorsed to the Plaintiff. The Promissory Notes are marked Exhibit-C-1 to C-10 in the plaint. The jurisdiction of the Court agreed upon by the Defendants and the aforesaid party is, therefore, not the agreed jurisdiction for the Plaintiff’s Suit. 14.Under the written agreement between the parties relating to their business the Defendants issued Promissory Notes. Promissory Notes are by their very nature negotiable. They can be transferred by merely delivery. The aforesaid parties also endorsed the Promissory Notes to the Plaintiff. There is nothing in the agreement which bars such endorsement. Such endorsement cannot be barred as that would be against the principle of negotiation. Once the Promissory Notes are endorsed to the Plaintiff, the Plaintiff becomes the holder in-due-course. As such holder or holder in- due-course that Plaintiff is entitled to sue under Promissory Notes unless it further endorses them to a 3rd party. The contract between the parties has nothing to do with the execution or endorsement of the Promissory Notes. Hence the Plaintiff has not sued upon the contract. The Plaintiff has sued only upon the Promissory Notes. The Suit is maintainable where the Plaintiff has been endorsed the Promissory Notes. The Promissory Notes are endorsed to the Plaintiff in Mumbai. The Plaintiff has directed Bank of Baroda, Mumbai for collection of the amounts under the Promissory Notes. 7 15.The Plaintiff is a Bank established under the laws of Spain having its address in Madrid (Spain). Since the Defendants carry on business in Mumbai and reside in Mumbai the Plaintiff had sued the Defendants in Mumbai. 16.Consequently the Defendants’ case that the Plaintiff could not have sued in Mumbai upon the Promissory Notes issued to the Party in Spain under the agreement between the parties which conferred jurisdiction of Spanish Courts is misconceived. The Suit is correctly filed by the Plaintiff Bank against the Defendants who reside and carry on business in Mumbai. 17.The Defendants also contend that the Plaintiff could not have sued in this Court because its Civil jurisdiction was barred under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT Act). 18.The DRT Act applies to a “Bank” defined under Section 2(d). Section 2(d) run thus:- “banks” means - (i) a banking company; (ii) a corresponding new bank; (iii) State Bank of India; (iv) a subsidiary bank; or (v) a Regional Rural Bank.” A “Banking Company” under Clause 2(e) of the DRT Act and a “Corresponding New Bank” defined under Section 2(f) are as defined under Section 5 of the Banking Regulations Act, 1949. These banks under 8 Sections 5(c) and 5(da) of the Banking Regulations Act are any company which transacts the business of banking in India and any Company which is a Bank under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act 1980. 19.The Plaintiff is not shown to be a Bank Section 2(d) of the DRT Act. 20.The learned Counsel for Defendant No.2 argued that the Internet printouts of the Website of the Plaintiff show that it is a Banking Company carrying on business in India. The entry in the printouts relate to Deutsche Bank constituted in Germany and carrying on business in Germany and Europe which also carries on business in India. The entry in the printouts do not relate to the Plaintiff which has been registered under the laws of Spain. 21.The Defendants contend that the Plaintiff is a Subsidiary Company. A Subsidiary Company is a separate legal entity. It is constituted separately from the holding Company. Section 4 of the Companies Act which defines the holding and a subsidiary Company shows that the Subsidiary Company is a separate company all together, but that separate company is deemed to be a subsidiary, if it is controlled by the Board of Directors or if it has the requisite amount of share holding in the holding Company. Since the holding Company is a separate legal entity it acquires rights and has obligations as a separate Company. 9 22.The Plaintiff Company, even if it is a Subsidiary of Deutsche Bank registered in Germany, is not a Bank under the DRT Act. 23.Counsel on behalf of the Plaintiff drew my attention to Section 22 of the Banking Regulation Act, 1949 (the Act) which relate to the licensing of Banking Companies. The Plaintiff did not carry on any Bank business in India. The Plaintiff does not hold the licence issued by the Reserve Bank of India. The Plaintiff, therefore, does not fall within the perview of the Bank Regulation Act also. 24.The case of the Defendants that the Plaintiff should have sued in the DRT under Section 17 of the DRT Act is incorrect, because the Plaintiff is not a Bank which is enjoined to sue in that special Forum. Consequently, the Civil Courts’ jurisdiction with regard to cause of action that accrued to the Plaintiff, which is a Bank registered in Spain and which does not carry business in India, is not barred. 25.The Defendants have shown that they have not been served with the Summons for Judgment. The Defendants have not shown that if served, they would have a good defence in the Suit by way of the lack of territorial jurisdiction as well as the inherent jurisdiction of this Court. The defence of the Defendants on merits relates only to the aforesaid bar to jurisdiction. 26.The Plaintiff has relied upon the judgment in the case of Rajni Kumar Vs. Suresh Kumar Malhotra & Anr. (2003) 5 SCC 315 which lays down the special circumstances required to be shown for setting aside the decree 10 under Order 37 Rule 4 of the C. P. C. The judgment is not a case in which the Summons for Judgment, stated to have been sent by registered post and under which service was deemed to be effected, was seen not to be served as contended. The observation in paragraph 9 of the judgment is that “non-service of summons will undoubtedly be a “special circumstance”. This would be such circumstances pleaded as are so unusual or extraordinary to justify the decree in Summary Suit. The judgment considers setting aside of decrees in ordinary civil suits under Order 9 Rule 13 of the C.P.C and distinguishes the same from the suits under Order 37 of the C.P.C. In paragraph 11 of the judgment it has been held that it is not enough for the Defendant to show special circumstances which prevented him from appearing or apply for leave to defend, but he has also to show the facts which would entitle him leave to defend the Suit. It is held that in that respect Order 37 Rule 4 is different from Order 9 Rule 13. In that case, it was observed, that the Defendant had shown sufficient cause for his absence, but he failed to disclose facts which would entitle him to defend the case. In that case it was observed that the Defendant did not say a word about any amount being in deposit with the Respondent or that the Suit was not maintainable under Order 37. It was, therefore, held that the High Court was right in accepting the existence of special circumstances justifying his not seeking leave of the Court to defend, but in declining to grant relief since he had mentioned no circumstances justifying any defence. 27.In this case it is clear and must be accepted that the Defendants were not served with the Summons for Judgment as required by law. In fact service 11 upon any Defendant is not seen to be correctly made. Defendants 3,4 and 5 are not served at all. Defendant No.1 is sought to be shown to be served through Defendant No.2, but that service is also not shown. The Defendant No.2 is shown to be served in his individual capacity at his residence. That service is not shown to be accepted by any member of his family or himself. Hence as in the case of Rajni Kumar (supra) the Defendants have shown sufficient cause for their absence on the date of passing of the Ex-parte decree. It will have to be seen whether the Defendants have failed or succeeded in disclosing the fact which would entitle them to sue. 28.This would be a defence on merits and not on non-appearance. The defence on merits relates only to the territorial and inherent jurisdiction of the Court. That defence has been seen as shown above. The Court is seen to have territorial jurisdiction. The inherent jurisdiction of the Civil Court is not seen to be barred. Both these defences which are taken on admitted facts based upon the documents of the Plaintiff (as in the case of the defence of territorial jurisdiction) and on the question of law (as for the bar of inherent jurisdiction of the Civil Courts) are seen to be misplaced. The Defendants have, therefore, failed to disclose the facts which would entitle them to defend the Suit as in the case of Rajni Kumar (supra). In that case no defence on merits were shown. In this case the defence on jurisdiction is seen not to be correctly taken and no other defence on merits of the case is shown. 29.In view of the special requirement under Order 37 Rule 4 of the C.P.C which enjoins the Defendants to show both the non-service of the 12 Summons for Judgment and the disclosure of their defence on a footing that the Summons for Judgment was served, the Defendants cannot be taken to have made out a case for grant of any relief in the Suit for either granting them leave to defend or to stay the execution of the decree that has been passed. Further the decree is not seen to be faulted as being without jurisdiction. Consequently, the Chamber Summons as well as the Notice of Motion are required to be dismissed and are dismissed. (SMT. ROSHAN DALVI, J.)