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2023 Supreme(Del) 5010
IN THE HIGH COURT OF DELHI AT NEW DELHI
Yashwant Varma, J.
Arcelormittal India Pvt. Ltd. – Appellant
Versus
Jsc Ogcc Kazstroyservice – Respondent
CS(COMM) 592 of 2022 & I.A. 17546 of 2022, I.A. 17547 of 2022
Decided On : 30-05-2023
Mr. Ashim Sood, Ms. Ananya Ghosh, Ms. Doel Bose and Mr. Velpula Auditya, Advocates, for the Plaintiff.
None, for the Defendant.
The liability of the defendant under the Corporate Guarantee was co-extensive with that of the principal debtor, and the plaintiff was entitled to enforce the guarantee and obtain a decree.
Headnote:
Order XXXVII - Summary Suit - Code of Civil Procedure, 1908 - Commercial Courts Act, 2015 - Recovery of Debts and Bankruptcy Act, 1993 - Insolvency and Bankruptcy Code, 2016 - Limitation Act, 1963 - Jurisdiction - Corporate Guarantee - Assignment Agreement
Fact of the Case:
The plaintiff filed a summary suit seeking a decree against the defendant for a sum of INR 25,59,46,009 along with interest and costs. The defendant failed to enter appearance within the stipulated time, and the suit continued ex parte. The plaintiff's claim was based on a Corporate Guarantee executed by the defendant in favor of the plaintiff's assignor, and subsequent assignment of the debt to the plaintiff.
Finding of the Court:
The Court found that the plaintiff's suit was within the jurisdiction of the Court and was filed within the limitation period. The Court also held that the defendant's liability under the Corporate Guarantee was co-extensive with that of the principal debtor, and the plaintiff was entitled to a decree in terms of the Code of Civil Procedure. The Court disregarded documents filed by the defendant and an interim order from a foreign court, holding that they were not admissible or enforceable.
Issues: Jurisdiction, Limitation, Enforcement of Corporate Guarantee, Admissibility of Defendant's Documents and Foreign Court Order
Ratio Decidendi: The Court's decision was based on the defendant's failure to enter appearance, the acknowledgment of debt by the principal debtor, and the co-extensive liability of the defendant under the Corporate Guarantee. The Court also emphasized the inadmissibility and unenforceability of documents filed by the defendant and an interim order from a foreign court.
Final Decision: The plaintiff was granted a decree against the defendant for the claimed amount along with interest and costs.
ORDER
1. The instant summary suit referable to Order XXXVII of the Code of Civil Procedure, 1908 [Code] has come to be instituted seeking the following reliefs:
"a) pass a decree against the Defendant for a sum of INR 25,59,46,009 along with interest pendente-lite and future interest at the rate of 16% per annum till realization of the aforesaid amounts in full.
b) pass a decree for the cost of the present Suit to be awarded in favour of the Plaintiff and against the Defendant;"
2. The record would reflect that the plaintiff had, in light of the subject matter of the suit constituting a commercial dispute as per Section 2(1)(c)(i) of the Commercial Courts Act, 2015 [The 2015 Act], complied with the pre-institution proceedings by moving the Delhi High Court Legal Services Committee for mediation. A non-starter notice came to be issued on 04 January 2022 whereafter the suit came to be instituted on 18 August 2022. On 29 August 2022, summons were issued to the defendant. As per the Affidavit of Service filed on 19 October 2022, service of summons along with suit papers was completed on 05 September 2022 vide email and 13 September 2022 by way of courier service.
3. In terms of Order XXXVII Rule 3(1) of the Code, the defendant was obliged to enter appearance within ten days of such service. On 15 October 2022, the defendant filed an application purporting to be under Order XXXVII Rule 3(3) of the Code for entering appearance along with an application for condonation of delay. Although notices were issued on the said application, the defendant chose not to attend to the proceedings which ensued thereafter on 07 December 2022, 31 January 2023 and 23 February 2023. In view of the aforesaid, the Court by its order of 23 February 2023 provided that the suit would continue ex parte the defendant.
4. In light of the above, it was submitted by Mr. Sood, learned counsel appearing for the plaintiff, that in terms of the provisions of Order XXXVII Rule 2(3) of the Code, the allegations and averments of the plaintiff would be deemed to be admitted and consequentially a decree is liable to be drawn in terms as prayed. Notwithstanding the above, Mr. Sood had invited the Court to go through the relevant material so as to be independently satisfied with regard to the entitlement of the plaintiff to the decree as prayed for.
5. For the aforesaid purposes, the following relevant facts may be noticed. On 27 April 2011, a Sanction Letter [Sanction Letter] was issued by the Delhi branch of the State Bank of Hyderabad [SBH] to KSS Petron Pvt. Ltd. [KSS Petron] sanctioning a principal loan of INR 25 crores [Hereinafter to be referred to as the "Credit Facility"]. In terms of the stipulations incorporated in the Sanction Letter, KSS Petron was also required to submit a corporate guarantee of the parent company, namely, the defendant here. Pursuant to the sanction of the said Credit Facility, a loan agreement was executed on 24 October 2011 [Loan Agreement] in Delhi between SBH and KSS Petron. For the purposes of securing the grant of credit by SBH, the defendant executed a Corporate Guarantee dated 05 December 2011 [Corporate Guarantee] in favour of the plaintiff.
6. It becomes pertinent to note that the defendant in Clause 1 of the Corporate Guarantee acknowledged its liability to take over the liabilities owed by KSS Petron. Clause 1 of the Corporate Guarantee reads thus:
"1. If at any time default shall be made by the Borrower in payment of the principal sum (not exceeding Rs. 25,00,00,000/-) together with interest, costs, charges, expenses and/or other monies for the time being due to the Bank in respect of or under the aforesaid credit facilities or any of them the Guarantor shall forthwith on demand pay to the Bank the whole of such principal sum (not exceeding Rs. 25,00,00,000/-) together with interest, costs, charges, expenses and/or any other monies as maybe then due to the Bank in respect of the aforesaid credit facilities and shall inde
