STATE BANK OF INDIA vs NOBEL BROTHERS on 27 February 2019

FINAL ORDER

(27.02.2019)

1. This execution application has been filed by the applicant bank against the defendants for recovery of a sum of $8,479,016.08 equivalent to Rs. 39,87,68,126.20 (Rupees Thirty Nine Crore Eighty Seven Lakhs Sixty Eight Thousand One Hundred Twenty Six and Paise Twenty Only) from the individual defendants and $8,308,516.08 equivalent to Rs. 39,07,49,511.20 (Rupees Thirty Nine Crore Seven

Lakhs Forty Nine Thousand Five Hundred Eleven and Paise Twenty Only) from the defendant i.e. Noble Brothers Impex together with pendentelite and future interest @ SBI prime rate Plus 4% from the date of judgment till its realization.

2. Brief facts of the case are that the applicant is a Banking Corporation incorporated, constituted and established by the SBI Act, 1955. It carries on inter alia, the business of banking. The applicant is authorized to do business in the State of New York and has an office at New York (USA).

3. It is further stated that applicant bank commenced a suit against inter alia, defendant Noble Brothers Impex Ltd., in the Supreme Court of State of New York, on August 01, 1995 alleging claims against the defendant no. 1 for (1) fraudulent conveyance; (2) tortuous interference with contract; and (3) violations of the United States Racketeer Influenced and Corrupt Organizations Act. (In short ‘RICO’)

4. It is further stated that Hon’ble Supreme Court of New York (USA) passed a judgment dated 27.11.2000 and 15.12.2000 against the respondent. Therefore the applicant bank has prayed for execution of the Judgment passed by Hon’ble Supreme Court of New York and prayed to issue recovery certificate accordingly.

5. Notices were issued. The respondent put appearance through their counsel and filed the reply to the execution application.

6. In reply the respondent has raised the objection that the present application has been filed on the basis of judgment passed by the Hon’ble Supreme Court of the State of New York. The respondent has denied that any decree has been passed by the Hon’ble Supreme Court of the State of New York, it is stated even otherwise, present application is not maintainable. It is also submitted that as per the documents filed by the applicant, the Hon’ble Supreme Court of the State of New York appointed a special referee to report and recommend on the issue of damages; the special referee gave a report on May, 15, 2000 and therefore, the judgment of Hon’ble Supreme Court of the State of New York is based only upon a report special referee. The answering respondent was never represented before the said special referee.

7. It is also submitted that the procedure adopted by the Supreme Court of State of New York is contrary to the procedure of the Indian courts and if at all there is any judgment against the answering respondent, the same is not pronounced by the court of conclusive jurisdiction.

8. Further, it is stated that this Tribunal have no jurisdiction to deal with the execution of the decree passed by the foreign court.

9. The applicant bank has filed the rejoinder to the reply filed by the respondent no. 1 and retreated the averments made in the execution application.

10. During the course of arguments, Ld. counsel for respondent contended that the aforesaid decree is not executable under Section 31A of the RDDB&FI Act, 1993 as the Section clearly states that only those decrees that have passed before the commencement of the RDDB&FI Act (amendment ordinance 2000 and has not yet been executed, then the decree holder may apply to the Tribunal pass an order for recovery of the amount. The decree passed by any court should be before the commencement of the amendment Act (i.e. 17.01.2000). In the present case the decree passed by the U.S. court is of 27.11.2000 and 15.12.2000 after the amendment and hence, the same is not executable before this Tribunal. It is also contended that the decree of the Hon’ble Supreme Court of State of New York is not a decree under Section 44A of the CPC, 1908 and hence the same is not executable. Ld. counsel for respondent further contended that under Section 44A of CPC, 1908, a foreign decree to be enforceable in India, must be passed by country with whom India has a reciprocating treaty and it should be passed by the Superior Court. However, India does not have a reciprocating treaty with the United States and further Supreme Court of New York is a Court at par with this Tribunal. It also contended that the aforesaid decree is also barred under Section 13 of the CPC and hence the same is not executable.

11. On the other hand, Ld. counsel for applicant bank vehemently opposed the objection raised by the ld. counsel for respondent no. 1 submitted that the applicant bank has filed the present application under Section 19, 31A read with Section 34 of the RDDBFI Act, 1993 and not under Section 44A of the CPC, 1908 and as per Section 22(1) of the RDDBFI Act, 1993 this Tribunal shall not bound by the procedure laid down by the CPC but shall be guided by the principle of natural justice and subject to the other provision of the RDDBFI Act, 1993. It is also submitted that as per Section 19 of the RDDBFI Act, where a bank or FI has to recover any debts from any person, it may file an application to the Tribunal. Therefore the applicant has filed the present application under Section 19 for issuance of a Recovery Certificate on the basis of Judgment passed by Supreme Court of New York.

12. Ld. Counsel for applicant also submitted that as per provisions of the RDDB&FI Act, 1993 no court or other authority have or be entitled to exercise any jurisdiction, power or authority (except the

Supreme Court and High Court exercising jurisdiction under article 226 and 227 of the Constitution of India) in relation to the matter deals with the recovery of debts due to banks and Financial Institutions, therefore, it is submitted that the applicant bank invoke the jurisdiction of this Tribunal. It is relied upon the judgment of Hon’ble Apex court in the matter of Allahabad Bank Vs Canara Bank and another [(2004) 4 SCC 406] and Hon’ble Bombay High court in the matter of Bank of India Vs Harshadrai Odhavji Mody [2002 Vol. 104 (4) Bom. L.R 455].

13. Considered the submissions of both sides and perused the record.

14. The main controversy arises in the present matter is that whether an Execution Application is maintainable before this Tribunal against a Decree Passed by Foreign Court i.e. U. S. Court.

15. According to the applicant bank, the present Execution Application has been filed under Section 19, 31-A, read with Section 34 of the RDDB&FI Act, 1993, and thus, same is maintainable before this Tribunal. It is also stated by Ld. Counsel for the applicant bank that the jurisdiction of this Tribunal stems out from the Section 22 of RDDB&FI Act, 1993 and also this Tribunal is not bound by the procedures laid down under the CPC, but shall be guided by principles of natural justice.

16. Whereas on the other hand, as per the Ld. Counsel for the respondents a foreign decree is executable only in terms of Section 44A of CPC, 1908 and Section 22 of the RDDB&FI Act, 1993 does not put fetters on the power of the Tribunal to enforce the provisions of CPC, in case same is in harmony with the principles of natural justice.

17. I have considered the contentions of the rival parties and also gone through the judgments on this aspect.

18. Section 22 (1) of the RDDB&FI Act, 1993 provides that the Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by the principle of natural justice thus, legislature with a clear intent provided that the Tribunal is not required to follow the procedure of CPC, however, at the same time for the purpose of natural justice, the Tribunal may follow the procedure laid down under the CPC. The only rider is natural justice.

19. Hon’ble Supreme Court in the matter of Industrial Credit and Investment Corporation of India Ltd. v. Grapco Industries Ltd. and Ors. [AIR 1999 SC 1975], held that the Tribunal can travel beyond the CPC and the only fetter that is put on its powers is to observe the principles of natural justice. The relevant para of the judgment is reproduced herein below: “11. We, however, do not agree with the reasoning adopted by the High Court. When Section 22 of the Act says that the Tribunal shall not be bound by the procedure laid by the CPC, it does not, mean that it will not have jurisdiction to exercise powers of a Court as contained in the CPC. Rather, the Tribunal can travel beyond the CPC and the only fetter that is put on its powers is to observe the principles of natural justice.”

20. Thus, it is settled that the Tribunal may follow the principle of natural justice which may be within the CPC also. In the present matter, the applicant bank has filed the Execution Petition for execution of a decree passed by Hon’ble Supreme Court of State of New York dated 27.11.2000 and 15.12.2000. Under the RDDB&FI Act, 1993. Under Section 31A of the RDDB&FI Act, 1993, it is provided that the Tribunal may issue a recovery certificate in case where a decree or order was passed by any court before the commencement of the

Recovery of Debt Due to Banks and Financial Institution (amendment) Act, 2000 and has not been executed so far. Thus, as per Section 31 A of the RDDB&FI Act, 1993, Tribunal has been given power to issue a recovery certificate only in case a decree or order passed before the amendment of 2000 however, in the present case, the decree was passed by the U.S. Court on 27.11.2000 and 15.12.2000 which is subsequent to the amendment of 2000 dated 17.01.2000, therefore, as such the applicant bank is entitled to benefit of Section 31 A of the RDDB&FI Act, 1993.

21. Since Section 31A of the RDDB&FI Act, is not applicable in the present matter therefore, Execution Petition against a foreign award is maintainable only in terms of Section 44A of the CPC, 1908, however, same would be applicable with the harmony of the provisions of RDDB&FI Act, 1993.

22. In Bank of India v. Harshadrai Odhavji Mody and Ors. [AIR 2002 Bom 449], Hon’ble Bombay High Court in a similar circumstances, held that there is no merit in the contention that Section 44A must in the circumstances be allowed to prevail over and in derogation of Section 17 and other related provisions of the RDDB&FI Act, 1993. The relevant para of the judgment is reproduced herein below: “16. There is thus no merit in the contention that Section 44A must in the circumstances be allowed to prevail over and in derogation of Section 17 and other related provisions of the RDB Act. It appears to me that harmony could be best achieved by taking the view that an execution of a foreign decree, where the decree holder is a Bank or Financial Institution, must be entertained by the Tribunal under the provisions of the RDB Act and while doing so, the Tribunal would be entitled to exercise all the powers which the District Court would have exercised under the Code of Civil Procedure.”

23. Similarly, in Indian Overseas Bank vs. C and H (DIA) Trading Ltd. and Ors. [I (2016) BC 27 (DRAT)], Hon’ble Debt Recovery Appellate Tribunal reiterated that the Tribunals may not bound by the procedure laid down in the CPC, but there is no bar as such to adopt the procedure given in the CPC in case the same is as per the principles of natural justice. It is held that: “15. ….................The submission that CPC does not apply and the provisions of Section 44- A(2) would not apply in my view, is apparently misplaced. Firstly, it is not quite correct to say that the provisions of CPC would have no application to the proceedings under the RDDBFI Act. What is provided in Section 22 of the RDDBFI Act is that the Tribunals and the Appellate Tribunals shall not be bound by the procedure laid down by the CPC, but shall be guided by the principles of natural justice, which shall be subject to the other provisions of the Act and the rules. The Tribunals and the Appellate Tribunals are also given power to regulate their own procedure. What can thus be made out from this section is that the Tribunals may not bound by the procedure laid down in the CPC, but there is no bar as such to adopt the procedure given in the CPC in case the same is as per the principles of natural justice. This may also mean that the Tribunal under the RDDBFI Act is not bound by strict procedure provisions given in the CPC and would have power to adopt a procedure which is in tune with the principle of natural justice.”

24. In view of the abovesaid categorical pronouncements in respect of the applicability of provisions of CPC on proceedings under the RDDB&FI Act, 1993, this Tribunal is of the view that there is no doubt in holding that Section 44A of CPC will apply to the proceedings before this Tribunal however, Section 44 A of CPC is applicable only on those cases where the decree has been passed by a Reciprocating Territory. For ready reference, Section 44A of CPC is reproduced herein under:- 44A. Execution of decrees passed by Courts in reciprocating territory.-

(1) Where a certified copy of a decree of any of the superior Courts of {The words "the United Kingdom or " omitted by Act 71 of 1952, s.2.} any reciprocating territory has been filed in a

District Court, the decree may be executed in { Subs. by Act 2 of 1951, s.for "the States".} [India] as if it had been passed by the District Court.

(2) Together with the certified copy of the decree shall be filed a certificate from such superior Court stating the extent if any to which the decree has satisfied or adjusted and such certificate shall for the purposes of proceedings under this section be conclusive proof of the extent of such satisfaction or adjustment.

(3) The provisions of section 47 shall as from the filing of the certified copy of the decree apply to the proceedings of a District Court execution a decree under this section and the District Court shall refuse execution of any such decree, if it is shown to the satisfaction of the Court that the decree falls within an y of the exceptions specified in clauses (a) to (f) of section 13. [Explanation 1.- "Reciprocation territory " means any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of this section ; and "superior Courts", with reference to any such territory, means such Courts as may be specified in the said notification. Explanation 2.- "Decree" with reference to a superior Court means any decree or judgment of such Court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty, bur shall in no case include an arbitration award, even if such an award is enforceable as a decree or judgment.]]

25. The term “Reciprocating Territory” has been defined in Explanation 1 attached to Section 44-A of the CPC as a country/territory outside India which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of Section 44A CPC.

26. The list of the Reciprocating Territories as per the provision of Section 44-A of the CPC, listed in the Notification of Central Government, is provided as under:

i. United Kingdom ii. Aden

iii. Fiji

iv. Republic of Singapore v. Federation of Malaya

vi. Trinidad and Tobago

vii. New Zealand, the Cook Islands (including Niue) and the Trust Territories of Western Samoa

viii. Hong Kong

ix. Papua and New Guinea

x. Bangladesh

xi. United Arab Emirates

27. Thus, under Section 44A of the CPC, a decree of any of the Superior Courts of any reciprocating territory are executable as a decree passed by the domestic Court.

28. However, the provision of Section 44A of CPC is also not applicable in the present matter as the United States of America is not listed as a Reciprocating Territory in the Notification of the Central Government. Moreover, no document has been placed on record by the Applicant Bank to show that United States of America is a Reciprocating Territory for the purpose of execution of a decree passed by the Hon’ble Supreme Court of United States of America. Further the letters of communication dated 27/02/2012 and 7/01/2013 supplied under the Right to Information Act 2005 by the Department of Legal Affairs, Ministry of Law and Justice put on record by the Respondents also show that there is no reciprocating territory between India and United States of America.

29. Therefore, in terms of provision of Section 44A of CPC, since the United State of America is not a reciprocating territory therefore, the present Execution Application which is based on the judgment of a court of United States of America is not executable in India.

30. The Hon’ble Bombay High Court has examining the issue regarding the execution of foreign decree in Marine Geotechnics LLC v. Coasta Marine Construction & Engineering Ltd. [2014 (2) Bom CR 769], and held that in case the decree is of a court in a non- reciprocating foreign territory, a party has to file a fresh civil action (suit) on that foreign decree, or on the original underlying cause of action, or both in a domestic Indian court of competent jurisdiction. The relevant para of the judgment is reproduced herein below: “21. Armed with a decree of a court in a non- reciprocating foreign territory, what must a party do in India? His option is to file, in a domestic Indian court of competent jurisdiction, a suit on that foreign decree, or on the original, underlying cause of action, or both. He cannot simply execute such a foreign decree. He can only execute the resultant domestic decree. To obtain that decree, he must show that the foreign decree, if he sues on it, satisfies the tests of Section 13.”

31. Similarly, in SNP Shipping Services Pvt. Ltd. v. World Tanker Carrier Corporation Hon’ble Bombay High Court held that since U.S.A. is not a reciprocating country as envisaged under section 44-A of the C.P.C. the judgment of New Orleans Court is not executable in India. “18. …............Since U.S.A. is not a reciprocating country as envisaged under section 44-A of the C.P.C. the judgment of New Orleans Court is not executable in India.”

32. Further in Oakwell Engineering Ltd. v. Enernoth Industries Inc. [E.A. No. 385/05 in Ex. P. No. 22/2005 (29.08.2006)] the Hon’ble Delhi High Court while discussing Section 44A of the Civil Procedure Code held that the scheme of Section 44A of the CPC is entirely different. It makes no mention of jurisdiction to try. Only thing necessary is that the decree has been obtained from any superior court of any reciprocating territory. The relevant para is produced hereinbelow: “10. …...............The scheme of Section 44A of the CPC is entirely different. It makes no mention of jurisdiction to try. Only thing necessary is that the decree has been obtained from any superior court of any reciprocating territory.”

33. Having regard to the facts of the present case, the relevant legal provisions and judgments cited, this Tribunal is of the considered opinion that the present execution application based on a decree of United States of America, a non-reciprocating country, cannot be executed by this tribunal. Thus, there is no merit in the submissions made by the Applicant bank in the present Application and the same is liable to be dismissed hence, dismissed accordingly.

34. The Applicant Bank filed Execution Petition in the year 2001 based on the judgments of the Hon’ble Supreme Court of State of New York dated 27.11.2000 and 15.12.2000 and the same was filed within the prescribed limitation period and since huge public money is involved in the present matter thus, in the interest of justice, liberty is allowed to the applicant bank regarding the limitation.

35. File be closed and consigned to record room. Copy of this order be sent to the parties.

(Dr. REKHA G. DHAKAR) PRESIDING OFFICER DRT-I DELHI (Pronounced in open court) Dated: 27.02.2019