Bombay High Court: In a case where a Company Incorporated in Luxembourg, filed an execution application against Respondent 3, Bhatia Trading Co. LLC, having its office in Sharjah, UAE, and also against Respondents 1 and 2, Suresh Tulsidas Bhatia and Rajeev Suresh Bhatia, residents of UAE, having their presence in Mumbai, India, seeking execution of the final judgment and decree dated 29-11-2022 passed by the Sharjah Federal Court, Civil Court of Appeal, UAE, a Single Judge Bench of Bharati Dangre, J., ordered and directed Respondents 1 to 3, to state on oath (i) full and complete details of assets, current assets, receivables as on date of the Final Judgment; (ii) furnish copies of the Annual Returns filed before the Income Tax Authorities for the last three accounting years; and (iii) furnish list of all their bank accounts with copies of the statements of accounts of the same for the last twos accounting years.
Background
Respondent 3 was availing credit facilities from HSBC Bank, Middle East Limited (‘HSBC Bank’) since 2003 and the credit facilities were secured by personal guarantees of Respondents 1 and 2, the father and the son. Under the facility offer letter, HSBC Bank granted credit facilities to Respondent 3, which were in the form of withdrawal of overdrafts, letters of credit, term loans, and import facilities.
In 2019, Respondent 3 failed to repay the credit facilities, and thus a notice was issued to it demanding repayment of the sums due and payable. By a demand notice, HSBC indicated to the borrower-respondents, that the sum due under the facility agreement, had accumulated to AED 114,486,113 and the total outstanding with respect to the personal guarantee of AED 2,000,000. The borrowers were instructed to pay the debts within five days of receipt of the letter and the demand notice was issued without prejudice to the HSBC Bank availing the rights and remedies available to it in law. Simultaneously, a notice was also issued to the individual borrowers, calling upon them to discharge their liability under the Facility Agreement.
HSBC Bank instituted a suit against borrowers for recovery of outstanding amounts before the Court of First Instance, UAE and it sought directions to Respondent 3 to pay the amount due and payable along with interest @12%. The Court of First Instance, UAE directed the borrowers to collectively pay HSBC Bank an amount of AED 114,477,038.83 along with the interest at 5% from the date of the registration of the case until full payment and to pay costs, expenses, and AED 1000 for advocacy fees.
Thereafter, HSBC Bank filed an appeal against the First Order, seeking an increase in the amount ordered to be paid by the borrowers, to AED 118,142,535. Respondents 1 and 3 also challenged the order in appeal. By a common judgment, the Court of Appeal, UAE rejected both appeals and upheld the First Order. Further, by a common order, the Supreme Federal Court, UAE dismissed the appeals filed by respondents, and partly allowed HSBC Bank’s appeal to reconsider certain claims. Respondents 1 and 2 filed an appeal before the Civil Court of Appeal and by an order, they were directed to pay AED 115,793,092 (approximately INR 262,62,05,301) to HSBC Bank, under credit facilities along with 5% interest till realisation of the amount and this amount was approximated to INR 40,61,62,436 till 27-10-2023.
HSBC Bank assigned the debts due from the borrowers to applicant, by way of an agreement captioned as ‘Sale and Purchase Agreement Project — Zeus’ (‘SPA’). Applicant claimed to have stepped into the shoes of HSBC Bank by taking steps to execute the final judgment against respondents in India, being the place of residence of the borrowers, since it anticipated that it would discover properties, against which it could realize its claims. Thus, the present Execution Application was premised on an assertion that applicant was unaware of all the assets of respondents, which might be located in India, and if the properties were disclosed, applicant might be able to realize the final judgment and the decree against the properties of Respondents 1 and 2, the borrowers in this country, and since UAE was a reciprocating territory, it was entitled to execute the decree passed by the Civil Court of Appeal in UAE.
Counsel for Applicant relied upon Section 44-A of the Civil Procedure Code, 1908 (‘CPC’) and submitted that a decree passed by the Civil Court of Appeal, UAE, as per the notification dated 17-01-2020 issued by the High Court of Law and Judiciary, Department of Legal Affairs, was capable of being executed in India as UAE was declared as a reciprocating territory.
Analysis, Law, and Decision
The Court noted that the understanding between the parties regarding the claims clearly conferred a right upon applicant to pursue the existing claims and to initiate new recovery actions though HSBC, retained the right to defend the reputational claim, and there was also a clarity that HSBC shall not take any action in relation to recovery of claim, on or after completion date without prior approval of applicant. The understanding between the HSBC Bank and applicant was limpid and comprehensible, even to a third party. HSBC Bank had unconditionally, irrevocably, and absolutely assigned all the benefits rights, title interest and benefits, arising out of the loans granted to respondent under the Assignment Agreement in favour of applicant.
The Court stated that applicant being the assignee of HSBC Bank, and in the wake of the specific stipulations in the SPA, was entitled to initiate the execution application. The terms of the Assignment Agreement clearly reflected that, as a buyer, applicant was entitled to pursue the existing claims of HSBC Bank and even initiate new proceedings in respect of debts transferred to it. The Court also stated that although HSBC had initiated the proceedings before the Court in UAE, seeking orders to pay the amount under the facility letters and to obtain a decree, applicant was entitled to pursue the claim in execution in the Courts in India by filing the Execution Application as the Assignment Agreement provided that the applicant as an assignee of HSBC Banks was entitled to pursue the proceedings and in certain cases, HSBC Bank was entitled to continue its existing claims against respondents, but it shall be for the benefit of applicant, as it was the ultimate beneficiary of the debts.
Applicant, in its capacity as the assignee of debts was the beneficial owner of the decree passed in favour of the HSBC Bank, even though it was pursuing the claims or execution proceedings in UAE, which was only in the interest and benefit of applicant, since all its rights, title, and interest were already transferred in favour of applicant through the Assignment Agreement. Therefore, the objection that the present application was not maintainable at the instance of applicant, was not worthy of consideration.
The Court opined that the submission, that there was a common decree, which was being executed at two places, was also not worthy of consideration, as there was no prohibition in having two proceedings. The Court relied on Oakwell Engineering Ltd. v. Enernorth Industries Inc., 2006 VII AD (Delhi) 863, wherein while dealing with Section 44-A of CPC, where a decree holder obtained decree and sought execution at Singapore Court, the Delhi High Court concluded that when the decree was brought before it for execution, it was well within its powers to entertain the execution petition.
The Court took note of Section 2, Order XXI Rule 10, Section 49, and Order XXI Rule 16 of CPC and opined that a person, who did not have a written assignment of decree, but who had succeeded to a decree holder’s right, could step into the shoes of a decree holder under Section 146 of CPC. The Court noted that the Assignment Agreement in the present case, in favour of applicant was clear and recognized it as the assignee of debts and would be covered under Order XXI Rule 16 of CPC. In any case, even applicant was an assignee under the principle of equities, since it was assigned a debt along with all rights, title, interest, and benefits arising therefrom and was therefore, competent enough to pursue the proceedings under Section 146 of CPC, as a person claiming under and through HSBC, the assignor.
The Court held that the contention that the Assignment did not make applicant entitled to seek execution of the decree, did not hold any merit and applicant was perfectly justified in seeking execution of decree in favour of HSBC Bank. The Court rejected the contention that Respondent 3 was not notified of its Assignment of Debts, by HSBC Bank in favour of applicant and stated that the debts were the property of HSBC Bank and it was at liberty to assign it even without consent or notice to the borrowers and notice upon the official email of Respondent 3 would be deemed to be a notice served upon Respondents 1 and 2.
The Court stated that the objection that no leave was sought under Order XXI Rule 16 of CPC from the Court, was without any merit, since under Rule 22(2), the Court had discretion to issue process without issuance of notice, if it was of the opinion that issuance of notice would cause unreasonable delay or defeat the ends of justice. The Court took note of the the Amendment by the Bombay High Court with effect from 01-11-1966, by which sub-rule (3) was inserted in Rule 22 of Order XXI, which stated that no order for the execution of a decree shall be invalid, merely by reason of the omission to issue notice under this rule, unless the judgment debtor had sustained injury by reason of such omission.
The Court further stated that the objection that HSBC Bank was not put to notice in the Execution Application, was frivolous objection as HSBC Bank under the Assignment Agreement was already aware that applicant was competent to initiate proceedings in India, pursuant to the final decree and if the whole purpose of Order XXI Rule 16 was to bring the parties to the Court on giving notice, HSBC being the assignor of the debt and the decree which was sought to be executed by applicant, there was no need to notify it or implead it as a party to the proceedings and this objection could not defeat the application for execution.
The Court held that Respondents 1 and 2, as borrowers, had no say as they were bound to discharge their obligations to HSBC under the loan documents/facility agreement and when they had utterly failed to discharge their obligations, either the HSBC Bank or applicant to whom HSBC had assigned its right and interest could seek the execution of the decree in favour of HSBC Bank.
The Court stated that the relief of disclosure would act in aid of the execution of the decree, which, applicant was entitled to seek in the wake of the assignment in its favour from HSBC Bank. Thus, the Court ordered and directed Respondents 1 to 3, to state on oath (i) full and complete details of assets, current assets, receivables as on date of the Final Judgment, (ii) furnish copies of the Annual Returns filed before the Income Tax Authorities for the last three accounting years and (iii) furnish list of all their bank accounts with copies of the statements of accounts of the same for the last twos accounting years. The Court also restrained respondents from selling, transferring, disposing of, or alienating/encumbering/pledging/mortgaging/hypothecating/charging/parting with possession of or inducting anyone else in respect of the properties and assets and estate of respondents as might be disclosed on oath or as might be known to applicant during the pendency of the proceedings.
[ARF SV 1 Sarl v. Suresh Tulsidas Bhatia, 2024 SCC OnLine Bom 2680, decided on 01-04-2024]
Advocates who appeared in this case :
For the Applicant: Sharan Jagtiani, Senior Advocate with Sushmita Gandhi, Vatsala Pant, Sanaya Patel and Kushal Boolchandani i/b Induslaw
For the Respondents: Mayur Khandeparkar with Nidhi Singh, Brian Noronha and Akshata Parkar i/b India Law LLP
