The Jammu and Kashmir Bank Ltd. vs Seth Rawinandan

S.N. Shankar, J.

(1) This appeal is directed against the order of the Court below executing the decree received by it from the District Judge, Jammu. The learned court has held that the decree was a nullity and the respondent-judgment-debtor was also a displaced person within the meaning of S. 2(1) of the Displaced Persons(Debts Adjustment) Act, 1951, and the execution against him was barred by time.

(2) Briefly stated, the relevant facts are that on 26/11/1949, the Jammu & Kashmir Bank Limited, the appellants herein, (hereinafter called "the Bank")obtained a decree from the court of the District Judge, Jammu ,for recovery of Rs. 81,487/8.00against the partnership firm, Hindustan Trading Company, and its two partners ,Seth Ravi Nandan, the respondent to this appeal and Kirpal Chander, on the basis of a cash credit loan account in which advances were made by the Bank to the firm against security of stocks of iron and steel pledged with the Bank. Part of the decretal amount was realised by the Bank by sale of these pledged goods. To realise the balance the Bank applied for a transfer certificate for Delhi where the respondent Seth Ravi Nandan, was stated to be residing and carrying on his business .By order dated 9/11/1961, the court at Jammu issued a transfer certificate under Order 21,rule 6 of the Code of Civil Procedure. On 18/11/1961, the Bank, on the basis of this certificate applied for execution to the District Judge, Delhi who transferred the execution to Sub Judge First Class competent to execute the decree.

(3) On 9/01/1969, the respondent filed objections u/s 47 of the CPC against the execution and contended that the decree against him was passed ex-parte and the court passing it was a foreign court and he had never submitted himself to the jurisdiction of that court and as such the decree was a nullity. He also contended that the liability created by the decree was in any case a debt within the meaning of Displaced Persons (Debts Adjustment) Act,1951 and that he was a displaced person within the meaning of this Act and was entitled to its benefit. The execution application was further pleaded to be barred u/s 37 of this Act. The appellant Bank resisted these objections. The court struck the following issues :

Is the applicant a displaced person within the meaning of Displaced Persons (Debts Adjustment) Act, 1951?2. Is the liability in dispute a debt within the meaning of the Act?3. Is the execution application barred by limitation u/s 37 of the Displaced Persons (Debts Adjustment) Act?4. Is the decree a nullity on account of its being ex-parte ?5. Relief?

(4) By the impugned order, the learned court, after hearing the parties, came to the conclusion that the respondent was a displaced person within the meaning of the Act and the decretal liability was also a debt within meaning of the Act, and by reason of section 37 of the Act, the execution application was barred by time. The decree, the learned court held, was also a nullity because the respondent had never submitted himself to the jurisdiction of the Jammu court which at the time when it passed the decree was a foreign court. With these findings he dismissed the execution application. The appeal is directed against this order.

(5) Shri P.L. Vohra has argued the appeal on behalf of the appellant-Bank while Shri Gian Singh Vohrahas appeared for the respondent.

(6) While urging that the decree was not a nullity Shri P.L. Vohra conceded that the District Judge of Jammu at the time when he passed the decree was a foreign court within the meaning of section 2(5) of the Code of Civil Procedure. The judgment, Therefore, on the basis of which this decree was based was evidently a foreign judgment. He also conceded that the date with reference to which the question as to whether this decree was a nullity or not has to be determined is to be the date when the decree was passed and not the date when the decree was subsequently transferred by the District Judge, Jammu, for execution after the merger of this territory with India. He, however, strongly urged that the decree could not be a nullity, as held bythe learned court below, simply because it was passed ex-parte against the respondent and he chose not to appear to contest the suit in the Jammu court. He urged that according to well recognised principles of International Law, a foreign court had jurisdiction to entertain an action against persons carrying on business in territories within its jurisdiction as partners when sued in the name of the firm and placed reliance on the respondents'' own statement as JDW. 2. in the court below .During his cross-examination dated 7/04/1962, the respondent has admitted in this statement that he was carrying on business in Jammu as well as Lahore and that he was also being assessed to Income Tax at Jammu. The counsel submitted that after these admissions it was not open to the respondent to say that the decree passed by the Jammu Court against him was a nullity. I find good deal of substance in this submission. Dicey, in his famous treatise'' Conflict of Laws'' in rule 26 of page 182 (VII Edition), while dealing with the question of jurisdiction in actions in personam has stated the general rule of International Law that when the defendant, in action in personam, at the time of the service of the writ, is not in England, the court has no jurisdiction to entertain the action against him, but this rule is subject to certain exceptions. Those exceptions have been enumerated in the discussion that followed. On page 209, exception 13 is in the following, terms:

" THE Court has jurisdiction to entertain an action against any two or more persons being liable as co-partners, and carrying on business in England when sued in the name of the firm(if any) of which such persons were co-partners at the time of the accruing of the cause of action."

(7) The principle enunciated in this exception is the recognition of the well established rule that two or more persons can join together to work in the name of what in legal terminology is called a partnership. If a person, to my mind, elects and agrees to carry on business in partnership with a resident of the foreign State, under the law in force there, he would be deemed to have agreed to submit himself to the jurisdiction of the court of that State in respect of transactions entered into by him in the conduct of such a business. I am unable to see why the Municipal Court of the state, in such a case, will have no jurisdiction to entertain the suit and pass a binding judgment against him. Cheshire in Private International Law on page 641-642(VI Edition) has dealt with this aspect of the questioning the following words:

"The circumstances in which an English court may assume power to determine a claim in personam are well settled, and it is legitimate to infer that the criterion by which the competence of an English court is tested must also be adopted when the inquiry relates to the competence of a foreign court. Personal jurisdiction in this country depends upon the right of a court to summon the defendant. Apart from special powers conferred by statute it is obvious that, since the right to summon depends upon the power to summon ,jurisdiction is in general exercisable only against those persons who are present in England. If the defendant is absent from a country and has no place of business there, then, whether he be a citizen or an alien, he would appear to be immune from the jurisdiction, unless he has voluntarily submitted to the decision of the Court. These considerations would seem to show that jurisdiction depends, either upon presence in a country at the time of the suit (with which may be classed the possession of a place of business there),or upon submission".

(8) Proceeding further the learned author makes reference to the provision of Administration of Justice Act, 1920which in setting up the system of extended judgments for the British Empire provides in clear terms that no judgment would be ordered to be registered under that Act if the judgment-debtor being a person who was neither carrying on business nor ordinarily resident within the jurisdiction of the original court did not voluntarily appear or otherwise submit or agree to submit to the jurisdiction of that Court. The exception made in the case of persons carrying on business in the foreign State unmistakably shows that a judgment against him was to be perfectly valid, I have, Therefore, no hesitation in holding that the carrying on of the business by the judgment-debtor in such a case in the foreign territory would be sufficient to give jurisdiction to the competent foreign court over him and the judgment passed by that court in such a case will not be a nullity. The basic reason for the judgment of the foreign court being inoperative and not binding on the non-resident foreigners is that he is presumed to be bound by the law of his own State and not to owe allegiance to the foreign State. It could not be said to be so in a case where it was found that the foreigner impugning the judgment had voluntarily submitted himself to the jurisdiction of the foreign court by his own conduct in agreeing to carrying on business in partnership with the resident of the State.

(9) It is not in dispute in this case, in fact it is admitted by the respondent in the objections filed by him, thathe carried on business at Jammu. Paragraphs 2 and3 of his objections read as under:

"2.That before the partition of the country in August 1947 amongst various other businesses he was also running a business under the name and style of ''Hindustan Trading Company'' at Residency Road, Jammu, as a partner with one Seth Kirpal Chander the other judgment-debtor in this case3. That during the course of this business of Hindustan Trading Company, the applicant judgment-debtor along with the other judgment debtor Seth Kirpal Chander, his partner as aforesaid, had an Overdraft Account with the Jammu & Kashmir Bank Ltd., Jammu Branch where in at the time of partition of the country certain sums are alleged to have been due to the said Bank from the judgment-debtor. The said liability of the judgment-debtor had been incurred before the applicant judgment debtor came to reside in India, and was secured by the pledged of movable property consisting of stocks of Iron and Steel, Machinery etc. ying in their godown at Jammu, belonging to the judgment - debtors. .The Bank had been placed in possession of the said property at that time before the partition of the country, who actually deputed their employee who was in the custody of such stocks and who supervised the sales of the said stocks .The entire sale proceeds of the said stocks were deposited with the Bank and were not to be appropriated by the judgment debtors".

(10) Then as stated earlier, appearing as his own witness as JDW2, he stated that he was carrying on business at Jammu, even though through the other partner, and that he was also assessed to Income Tax at Jammu. This unmistakably proves that the respondent was voluntarily carrying on business at Jammu.

(11) I am, Therefore, clear in my mind that this case squarely falls within the exception mentioned in Dicey''s "Conflict of Laws" extracted above and the judgment passed by the Jammu Court against the respondent was nota nullity.

(12) The learned court below has relied upon SirdarGurdyal Singh v. The Rajah of Faridkote 21 IA 171 to conclude that this judgment was a nullity .The facts of that case were different. No question of the person impugning the judgment, himself carrying on business in the foreign State was involved there. The appellant, Sirdar Gurdyal Singh, in that case for five years beginning in 1869 was in the service of Rajah of Faridkote as his Treasurer. He, thereafter, left Rajah''s service and ceased to reside within the territorial jurisdiction of the native State of which he was a native subject and where he was domiciled. At the time the suit was filed he was neither residing in Faridkote nor carried on any business there. In fact, it was found that after 1874 he had never gone to Faridkote. Processes of the suits filed by the Rajah were served on him at jhind. He disregarded them with the result that ex-parte decrees were passed against him .It was, in these facts that their Lordships held that there was nothing to take this case out of the general rule that the plaintiff must sue in the Court to which the defendant is subject at the time of the suit. The decision has no application in the facts of the case in band .

(13) The learned counsel for the appellant, referring to the statement of the respondent also pointed out that after his admission that he was carrying on business asa partner at Jammu and that he was also being assessed to Income Tax at Jammu it was no where even alleged by him that he was not the subject of the State of Jammu. This ,indeed, was a fact that had to be established bythe respondent before he could assail the judgment. No evidence in this regard has, however, been pointed out to me. This also supports my conclusion that it is not possible in this case to hold that the judgment against the respondent was a nullity.

(14) The learned counsel for the respondent however, placed strong reliance on Raj Rajendra Sardar Maloji Marsingh Rao Shitole Vs. Sri Shankar Saran and Others, The Owners and Partners of the firm named Shah Kantilal Vs. Dominion of India owing East Indian Railway, Firm Kanhaiyalal Mohanlal Somani v. Paramsukhalias Premsukh Jaskaran Kabra Meheshri AIR 1956 Nag 2730 ; H.M. Subbarya Setty & Sons v. S.K.Palani Chetty & Sons AIR 1952 Mys 690 AIR 1955 103 (Nagpur) Shah Prem Chandv. Shah Darmal AIR 1954 R&H 4 and GokaldasNaranji v. Dwarkadas Jethabhai AIR 1954 Sau123. None of these cases throws any light on the aspect of the problem that is involved here, namely, when a person impugning the judgment was found to be voluntarily carrying on business within the jurisdiction of the foreign court which passed the judgment and then absented himself when the suit was filed against him. For reasons aforesaid ,I am unable to endorse the finding of the learned court below that the judgment of the Jammu Court in this case was a nullity and could be ignored .

(15) The learned Counsel for the respondent then urged that even if it be assumed for the sake of argument that it was a valid decree the same could not be transferred by the Jammu Court for execution to India. No objection was taken in the court below to the validity of the transfer certificate issued by the District Judge, Jammu ,on the basis of which the execution came to be pending in this court. The learned counsel urged that it was purely a legal question and the absence of this objection at the earlier stage did'' not debar him from canvassing it now. Placing reliance on the full Bench decision of the Punjab High Court in Firm Radhe Sham Roshan Lal Vs. Kundan Lal Mohan Lal, he contended that the mere fact that the State of Jammu subsequent to the passing of the decree ceded to India does not make the decree of erstwhile State executable in India. He said that the decree by the District Judge of Jammu was suffered by the respondent because he knew fully well that it was a foreign court and that he will be entitled to resist it? execution in case the same was executed against him in India. This right of the respondent he said, was a vested right which could not be taken away by the change brought about by subsequent events as a result of the merger. He placed strong reliance on the observations of the Bench on page 198 of the report of this case where it was observed that the decree passed by a court of a Native State was a non est and was never a good decree as far as India was concerned where the defendant had not submitted himself to the jurisdiction of the foreign court. This disability, it was observed by the court could not be removed because a thing which was non est could never become a positive fact. The decree under execution, the learned counsel contended, was a ''lion est'' and was of no avail in the territory of India .The fact that the CPC was subsequently extended to the State entitling it to issue a transfer certificate did not make any change in the position and the decree would still remain non-executable.

(16) The argument, to my mind, is not a pure question of law because amongst others it does involve reference to the terms of merger. But assuming that the argument is purely legal it loses sight of the subsistence of reciprocal arrangement between the two States at the relevant time in so far as the execution of such a decree was concerned .The existence of such an arrangement between India and the erstwhile State of Jammu is not, denied .Provisions of S. 44-A of the Code of Civi procedure Therefore, were clearly attracted in this case. Sub-section (i) of S. 44-A governed the case. It reads asunder:

"WHERE a certified copy of a decree of any of the superior Courts of any reciprocating territory has been filed in a District Court, the decree may be executed in India as if it had been passed by the District Court."

(17) Decree of the Jammu Court at the time when it was passed was, Therefore, executable in India under this provision .

(18) Relying on The Owners and Partners of the firm named Shah Kantilal Vs. Dominion of India owing East Indian Railway, the learned counsel contended that provisions of S. 44-A could not be invoked in such at case. I am unable to accept the submission that this case is an authority for the broad proposition sought to be made out. No doubt the head-note does make a reference to section 44-A and states that it will not apply but the judgment read as a whole clearly shows that there was no question of reciprocity involved in that case and section 44-A was not at all considered bythe Court in this background. The ex-parte decree which was sought to be executed in that case was obtained on 21/10/1948 from the court of the Civil Judge at Okhamandal in the former State of Baroda against the Union of India as owning the East India Railway. The decree was got transferred to the Calcutta High Court for execution. The objection taken before the High Court was that the decree could not be executed in Calcutta firstly because it had been passed by the court of native State of Baroda not established or continued by the authority of the Central Government and secondly because it was a decree against a foreign State which never submitted to the jurisdiction of the foreign Court. Both these submissions prevailed and the High Court had that the Court at Okhamandal in the former State of Baroda was a foreign court and had no jurisdiction to pass a decree against a foreign State which at that time was Dominion of India. The decree, Therefore, it was held, was a nullity in breach of the International Law .It was in this context that section 44-A was said to be not applicable. No question as to the effect of the existence of arrangement of reciprocity arose in that case. The case, Therefore, is of no assistance to the respondent.

(19) For the reasons aforesaid, I am of the view that the decree passed by the District Judge of Jammu against the respondent in this case was not a nullity and in view of the reciprocating arrangements that are admitted to have existed between India a.nd the State of Jammu at the relevant time the same was executable in Indiain pursuance of S. 44-A of the CPC independently of the transfer certificate.

(20) This takes me to the next question as to whether the respondent was entitled to the benefit of the Displaced Persons (Debts Adjustment) Act and its provisions. The provisions under which the respondent claimed relief under this Act are sections 17 and 37. Section 17 provides that where in respect of debt incurred by a displaced debtor and secured by the pledge of immovable property belonging to him the creditor has been placed in possession of such property at any time before the debtor because a displaced person, the creditor may ,if he is still in possession of the pledged property, realise the sum due to him by sale of such property after giving to the debtor reasonable notice of the same but the debtor shall not be liable to pay the balance where the proceeds of such sale are less than the amount of the debt due. Section 37 provides that notwithstanding the provision of section 48 of the CPC no order for the execution of a decree in respect of a debt against a person shall be made upon an application Presented after expiration of six years in case of the decrees passed before the commencement of this Act. The case of the respondent is that in this case goods had admittedly been pledged by his firm with the Bank which the Bank had already sold. In terms of section 17 the respondent maintains that he is no longer liable for the balance of the decretal amount IF any is left after adjusting the sale proceeds of the pledged goods .Under S. 37 his case is that this decree having been passed on 26/11/1949, that is, before the commenceme at of this Act, application for its execution was barred by time after the expiry of six years from the commencement of the Act, namely, after December,1957.

(21) The learned counsel for the appellant at first contended that the provisions of Section 17 as well as Section 37 of the Displaced Persons (Debts Adjustment) Act could not be invoked by the respondent in a civil Court because according to the purpose and the scheme of this Act these provisions could be invoked only by a displaced person before the Tribunal constituted under the Act, after he had made an application under the Act, for adjustment of this debts. The respondent it was maintained, never made any such application before such a Tribunal and was, Therefore, not entitled to the benefit of these provisions .In reply to this argument, the learned counsel for the Respondent cited Krishan Talwar Vs. Hindustan Commercial Bank Ltd. and Another, where the Division Bench held that section 3 of this Act gave over-riding effect to the provisions of the Act and the rules made there under as against any other law for the time being in force or any decree or order of the court or even a contract between the parties and that provisions of section 17 were in addition to the substantive law of the country. In that case the advantage of section 17 was held to be available to a debtor even in a civil court. He also cited Punjab Cooperative Bank Ltd., v. Amrik Singh and others, a single Bench decision of the Allahabad High Court Punjab Co-operative Bank Ltd. Vs. Amrik Singh and Others, where this view of the Punjab High Court was affirmed. In face of these authorities, the learned counsel for the appellant did not press his argument that the provisions of the Act were not applicable to the instant case. Nothing further, Therefore, need be said on this aspect of this case.

(22) He, however, contended that the decree in question was not a debt within the meaning of the Act nor was the respondent a displaced person to be entitled to the benefits of section 17. I have not been able to persuade myself to accept this contention Displaced person is defined in sub-section(IO) of section 2 of the Act in the following terms:

"''Displaced person'' means any person who, on account of the setting up of the Dominions of India and Pakistan, or on account of civil disturbance or the fear of such. disturbances in any area now forming part of West Pakistan, has, after the 1st day of March, 1947, left or been displaced from his place of residence in such area and who has been subsequently residing in India and includes any person who is resident in any place now forming part of India and who for that reason is unable or has been rendered unable to manage, supervise or control any immovable property belonging to him in West Pakistan ,but does not include a banking company ;"

(23) There is unrebutted statement of the respondent as J.D.W. 2 that he had properties in Lahore but after the partition on account of setting up of the Dominions of India and Pakistan, he bad to shift from there because he was unable to manage those properties. He was, therefore ,clearly a displaced person within the meaning of the Act.

''DEBT'' is defined in section 2, sub-section (6) of the Act. The clause applicable and relevant for this case is clause (a) of this sub-section. It reads as under :(6) "Debt" means any pecuniary liability, whether payable presently or in future, or undera decree or order of a civil or revenue court or otherwise ,or whether ascertained or to be ascertained, which (a) in the case of a displaced person who has left or been displaced from his place of residence in any area now forming part of West Pakistan, was incurred before he came to reside in any area now forming part of India".

(24) The learned counsel urged that in order to be a'' debt'' falling within clause (a), the only liability envisaged was the liability incurred by the Displaced person ata place which now forms part of Pakistan. He submitted that a debt incurred in a foreign country was not covered by this clause. I am unable to see any distinction in this definition between a debt incurred by a displaced person in territories now forming pa''t of West Pakistan and the debt incurred by him in any other foreign country. The Act was promulgated to make provisions for the adjustment and settlement of debts due by persons and for the recovery of certain debts to them and for matters connected therewith and incidental thereto as would be apparent from its preamble. The intention of the Legislature was to provide relief to that category of persons who were found to be displaced persons within the meaning of sub-section (1)of section 2 of the Act. The necessity for this legislation arose because of the peculiar circumstances that were created after the partition, of the country and it was felt that a special beneficial treatment was called for in respect of this category of persons to enable them to rehabilitate themselves. The relief was provided not with reference to the debts or the place where they were incurred but it was conferred on displaced persons as such ,for whose benefit the Act was promulgated. In this view, Therefore, the respondent is a displaced person and the decree in question is a debt within the meaning of the Act.

(25) If the provisions of sections 17 and 37 conferred independent rights on a displaced person even though he did not resort to the provisions of Displaced Persons(Debts Adjustment) Act, 1951, as the learned counsel for the appellant concedes that it does, there is no escape from the conclusion that the benefit of both these provision was available to the respondent. The debt incurred by him was secured by the pledge of movable property which had been placed in the possession of the Bank at a time before he became a displaced person which the Bank has already sold. The rights and liabilities of the parties in this premises will be governed by section 17 of the Act. In terms of clause (c) of this section he is not liable to pay any balance even if the sale proceeds of the pledged properties are less than the amount of the debt due .Similarly according to section 37 of the Act, which in terms has to be applied not withstanding anything contained in section 48 of the Code of Civil Procedure, no order for the execution of the decree in respect of this debt can be made upon an application presented after the expiration of six years of the date of the decree. The decree in question was passed as far back as 26/11/1949. Execution taken out in the year 1961 was clearly barred by this provision. I am, Therefore, of the view that the application for execution of the decree filed by the appellant in the court at Delhi was incompetent and was rightly dismissed by the learned court below.

(26) This appeal consequently fails and is dismissed but in the circumstances of the case and the nature of controversy involved the parties are left to bear their own costs.