2001 Supreme(SC) 756

2001(3) Supreme 554
SUPREME COURT OF INDIA
(From Punjab & Haryana High Court)
V.N. Khare & S.N. Variava, JJ.
M/s. International Woolen Mills -Appellant
versus
M/s. Standard Wool (U.K.) Ltd. -Respondent
Civil Appeal No. 3316 of 2001
(Arising out of SLP (C) No. 2250 of 2000)
With
Civil Appeal No. 3317 of 2001
(Arising out of SLP (C) No. 5332 of 2000)
Counsel for the Parties :
For the Appellant : A.K. Chopra and P.N. Puri, Advocates.
For the Respondent : Aman Hingorani, Ms. Priya Hingorani, Advocates for M/s. Hingorani and Associates, Advocates.

IMPORTANT POINT
High Court was wrong holding that second application was barred on principles of constructive res-judicata. But High Court was right in its conclusion that the foreign decree was not on merits. Thus such a decree cannot be enforced in India in view of Section 44A(3) read with Section 13(b) C.P.C.

Headnote:(i) Civil Procedure Code, 1908-Section 11 Exp. IV-Constructive res judicata-Execution of Foreign Decree in Indian Court by respondent-Summons served on appellant-Appellant filed an application praying for dismissal as it was filed without following the procedure prescribed under Sections 38, 39 and 40 of C.P.C.-Reply of respondent was that execution was under Section 44A of C.P.C. to which Setions 38 to 40 not attracted-In view of this stand the appellants filed another application that as decree was not on merits so execution must be refused in view of Section 44A(3) r/w Section 13(b) of C.P.C.-Trial Court dismissed both the applications-Revision to High Court-High Court dismissed revision on ground that second application was barred by the principles of constructive res judicata though decree was on merits-Whether High Court was right in holding that the second application was barred on priciples of constructive res judicata? (No)-Case law referred, but distinguished on ground that in this case there was no final decision on first application which operated as res judicata. (Paras 9 & 10)

        Held : The first question for consideration is whether the High Court was right in holding that the second Application was barred on principles of constructive res-judicata. It must be noted that the first Application was on the ground that the provisions of Sections 38, 39 and 40 of the Code of Civil Procedure had not been complied with. In that Application the defence taken was that the decree was being executed under the provisions of Section 44-A of the Code of Civil Procedure. In view of this stand, before any decision was given, the second Application had been filed. Both the Applications were heard together. In other words the second Application was filed and heard before any decision was given in the first Application. Both the Applications were only decided on 15th March, 1999. There was thus no question of their being a decision finally deciding a right or claim between the parties. Mr. Hingorani however submitted that this case would be covered by Explanation IV to Section 11 of the Code of Civil Procedure. He submitted that in the earlier Application the defence regarding non compliance of Section 13(b) could have been taken but had not been taken. He submitted that it was not open to the Appellants to take such a defence in a subsequent Application. In our view there is no substance in this submission. Explanation IV to Section 11 of the Code of Civil procedure would have come into play only if some decision had been finally given before the second Application was filed. In that event it could have been urged that all available points should have been urged before that decision was given. In this case the second Application was filed before any decision on the first Application was given. The Appellants could have, instead of filing a second Application, amended their first Application and taken these pleas in that Application itself. Had they amended the first Application there would be no bar of res-judicata or constructive res judicata. If that be so one fails to understand how the second Application was barred by principles of res-judicata or constructive res-judicata. To be remembered that the Orders were passed after hearing arguments on both the Applications. Under such circumstances no question arises of their being any res-judicata or constructive res-judicata. (Para 9)

       (ii) Civil Procedure Code, 1908-Section 44A(3) r/w Section 13(b)-Foreign judgment if not conclusive between the parties, the same cannot be executed in India-Foreign judgment/decree when not conclusive-When it has not been given on merits-In present case, foreigndecree given ex-parte in absence of defendant/Appellant-Whether can be held to be given on merits? (No)-Effect-Decree is not conclusive and is not executable in India-Appeal allowed-Case law discussed.

       Held : By virtue of Sub-section (3) the Court shall refuse execution if it is shown to the satisfaction of the Court that the Decree falls within any of the Exceptions in clauses (a) to (f) of Section 13. (Para 12)

       Thus under sub-clause (b) if the decree has not been given on the merits or the case then the foreign judgment is not conclusive between the parties and the same cannot be executed in India. (Para 14)

       The question which then arises is whether the Decree, set out herein, above can be said to be a decree on merits. Parties have cited a large number of authorities of various High Courts on the question as to when a decree can be said to be on merits. (Para 15)

       In our view the passage in Sir William Rattigan s Private International Law (1895) at pages 234-235, reproduced above, states the correct law. With great respect to the learned Judges concerned the restricted interpretation sought to be given cannot be accepted. With greatest of respect to the learned Judges we are unable to accept the broad proposition that any decree passed in absence of Defendant, is a decree on merits as it would be the same as if Defendant had appeared and confessed Judgment. We also cannot accept the proposition that the decree was on merits as all documents and particulars had been endorsed with the statement of claim. With the greatest of respect to the learned Judges they seem to have forgotten at stage of Issuance of writ of summons the Court only forms, if it at all does, a prima-facie opinion. Thereafter Court has to be consider the case of merits by looking into evidence led and documents proved before it, as per its rules. It is only if this is done that the decree can be said to be on merits. (Para 22)

       Held further : On the basis of this law let us now see whether the present decree is a decree on merits. It is to be seen that between the parties there is a controversy whether the Appellant/ defendant was at all served. As stated above it is not necessary for us to resolve this controversy. For the purposes of this Order only we will presume that the Appellant had been served. Facts on record disclose that before service was effected an affidavit had been filed in the English Court by one Kaashif Basit, Solicitor for the Respondent, to which affidavit had been annexed copies of the invoice and other relevant documents. On the basis of this affidavit an order in the following terms came to be passed:

       "UPON reading the Affidavit of Kaashif Basit sworn 20 January 1998

       IT IS ORDERED that the Plaintiff be at liberty to serve the Summons in this action on the Defendant at 31, Industrial Area-A, Ludhiana-141003, Punjab, India, or elsewhere in India, and that the time for acknowledging service shall be 23 days after service of the Summons on the Defendant."

       This shows that leave to serve the Appellant was granted after reading the affidavit. Thus at this stage the Court had presumably seen the documents annexed thereto. The Court has been careful enough to note that it had read the affidavit. However, at this stage, only a prima facie opinion was being formed. Thereafter the said Mr. Kaashif Basit, Solicitor for the Respondent had filed an affidavit of service stating that service had been effected on one Yash Paul, who is claimed to be an employee or the Appellant. To this Affidavit also all relevant documents were annexed. Thereafter no documents are tendered nor any evidence led. The English Court then pronounces the judgment and decree, which has been set out herein above. It does not even say that the second Affidavit had been read. This Judgment and decree does not indicate whether any documents were looked into and/or whether the merits of the case was at all considered. It merely grants to the Respondent a decree for the amounts mentioned therein. To be noted that the Appellant had, by his letter dated 8th November, 1997, replied to the Notice of the Respondent dated 18th October, 1997. In this reply it had been mentioned that goods were of inferior quality and not as per contract. Court has not applied its mind or dealt with this aspect. It has not examined points at controversy between the parties. It is given ex-parte as Appellant did not appear at hearing of Suit. It is not a judgment on merits. (Para 32)

       Held finally : On the principles of law enunciated herein above, in our view, it is clear that such a decree cannot be said to be a decree on merits. Such a decree cannot be enforced in India. In this view of the matter Civil Appeal No.3316 of 2001 [arising out of SLP (Civil) No. 2250 of 2000] is allowed and the Application of the Appellant that this decree cannot be enforced in India as it is not on merits is made absolute. Civil Appeal No. 3317 of 2001 [arising out of SLP (C) No. 5332 of 2000] stands dismissed. There will be no order as to costs in both the Appeals. (Paras 33 & 34)