Singapore Court’s Landmark Ruling: An Insight into Indian Courts’ Exercise of Inherent Powers UCO Bank v. Green Mint Pte. Ltd.: A case comment

Understanding the Singapore Court’s landmark ruling

In a significant decision in UCO Bank v. Green Mint Pte. Ltd.¹, the High Court of the Republic of Singapore (Singapore Court) expanded its inherent powers to assess the plaintiff’s claim on merits in the default of a defence. The Singapore Court rendered this judgment on the merits in order for the plaintiff to be able to enforce the judgment in India, unlike the ordinary case where the courts deliver an ex parte judgment on the defendant’s failure to file its defence. This decision exemplifies the challenges that might occur when a plaintiff is entitled to a default judgment. It also put emphasis on seeking a well-reasoned court decision that may be a necessary step to strengthen the plaintiff’s standing if a judgment must be enforced in a foreign jurisdiction.

The facts of the case are such that pursuant to a Facility Agreement, the plaintiff, UCO Bank, Singapore Branch was to disburse a certain sum as credit facility to the defendants in return of which personal guarantees were executed to keep the plaintiff indemnified against any loss. However, on a successful grant of facilities by the plaintiff, the defendant failed to make payment, which led to the initiation of a suit against the Director of the defendant Company i.e. Green Mint Pte. Ltd., Mr Gaurav, seeking the sum due along with interest. During the proceedings, the defendant failed to enter an appearance but subsequently clarified during a pre-trial conference that he does not wish to file a defence. Hence, the Court while observing the plaintiff’s entitlement to a judgment on merits framed the following issues: First, whether the court has the authority to hear a claim on its merits when the defendant has failed to defend. Second, if the court possesses such authority, is it proper to use it in this case? Third, presuming that such a power is appropriate, whether the plaintiff has satisfied its burden of demonstrating its claim for judgment to be entered in its favour on the merits?

Comparative analysis: Singapore versus India’s approach to inherent powers

The Singapore Court gave its decision in favour of the plaintiff upon the reasoning that the court has inherent powers to hear such claims. It also discussed that it is essential to keep in mind that the term “inherent powers” should not be confused with the term “inherent jurisdiction”. Theoretically, the terms “jurisdiction” and “powers” are separable by arguing that jurisdiction is a substantive power to hear and determine a matter whereas powers, in contrast, are simply incidental; procedural devices that are used by the court to effect its jurisdiction.² A Court may have the jurisdiction to hear the dispute but may not have the power to grant a suitable remedy. This distinction has been given various meanings by a lot of common law jurisdictions; however, the Singapore courts have observed that both these terms are different but related concepts, and both mean “authority” and “power”.³ The courts do not have unlimited “inherent powers” and it should only be used to prevent abuse of justice. Furthermore, as the Court of Appeal observed in Nalpon Zero Geraldo Mario, In re⁴, there is a distinction between the “inherent jurisdiction” of the court and its “inherent powers”, the former “being the court’s inherent authority to hear a matter”, while the latter “being its inherent capacity to give effect to its determination by making or granting the orders or reliefs sought by the successful party to the dispute”. Therefore, it is the court’s inherent powers, not its inherent jurisdiction that enables the court to hear a claim on the merits while the defendant is in default of defence.

Similarly, in India, the Code of Civil Procedure, 1908 (the Code)⁵ expressly defines the term “inherent powers” under Section 151⁶ and states that the Court shall exercise its inherent powers as may be necessary to ensure justice or to prevent abuse of the process of the court. However, the Court must take into account two major principles while exercising its inherent powers. The first is that the authority should only be used to further the interests of justice, and the second is that it should prevent misuse of the legal system. In case such power is expressly forbidden by any statute, it shall not be exercised.

Shifting paradigm: Judgment on merits versus default judgment

While the provisions of the Singapore Rules of Court, 2021 (the Rules)⁷ contains no specific provision relating to considering the claim on merits, it does specify that the party asserting the claim has to first apply for an ex parte order under Order 6 Rule 7 of the Rules for a default judgment. It also specifies a mandatory condition for the plaintiff under Order 2 Rule 6, to prove that the original application has been duly served to the defendant. Even though this provision does not specifically say that the courts may grant the plaintiff a judgment on merits, the enforceability standards upheld by common law States cannot be disputed. According to the common law principles, as widely followed, a foreign judgment must be final and conclusive in order to be enforceable.⁸

On the contrary, the law in India is amply clear on the scenario where there is a default of defence i.e. the Court shall proceed ex parte. According to Order 20 Rule 5 of the Code⁹, it is incumbent on the courts to deliver a judgment on merits notwithstanding any reasoning to the contrary whatsoever. Simply put, a judgment should contain reasons and must be in conformity with the provisions of Section 2(9) CPC¹⁰ as was also observed in Meenakshisundaram Textiles v. Valliammal Textiles Ltd.¹¹. However, the Court shall not automatically rule in favour of the plaintiff in case the defendant does not want to file a defence. This would certainly not mean that the defendant admits the claim of the plaintiff against himself. To ascertain a valid decree on merits, the principle of “dominus litus” comes into play here which means that the person who derives benefit out of the suit holds the ultimate responsibility of managing and proving its own case. The initial onus is always on the plaintiff to make out a case which entitles him to relief.¹² Additionally, the parties to a suit must stand on their own legs and it is the responsibility of the party taking a specific plea to prove it by way of producing necessary evidence.¹³

The Singapore Court in the present scenario have also considered the position taken by the English courts in Berliner Bank AG v. Karageorgis¹⁴ which was also further referred to in Habib Bank Ltd. v. Central Bank of Sudan¹⁵ and Eurasia Sports Ltd. v. Tsai¹⁶. The Courts in these decisions have observed that a court has inherent power to deliver a judgment on merits in case of a defendant’s failure to either appear or file a defence. The relevance of a judgment on merits was also emphasised in terms of enforceability over a mere judgment on default.

Exploring the benefits and challenges for Indian business

The Indian courts may gain a lot from adopting this Singapore Court decision.¹⁷ Diverging from the ordinary route of an ex parte decision which involves a plaintiff going through the discovery stage and the pre-trial affidavits of evidence-in-chief stage, Indian businesses seeking a swift closure along with a cost-effective procedure can certainly benefit from this approach adopted by the Singapore Court. This will also encourage a predictable judicial framework as now the parties would know that the judgments would be based on merits in case of a default in defence, subject to fulfilment of certain conditions by the party ascertaining the claim.

While this ruling is a welcome move for banks and corporations, they could also encounter certain challenges on their path to adopt a new procedure. The plaintiff would now need to make sure that its case is best presented in order to win a judgment on the merits of its claim in the absence of the defendant, which could create some challenges in the form of time and resource allocation. Additionally, the inherent powers of the court could be questioned as the certainty in the delivery of judgment in case of default of defence can prompt various unpredictable countermeasures from the defendant.

Concluding remarks

Despite not having a particular provision that addressed the situation in the current case, the Singapore Court upheld the fundamental principles of the country. The Singapore Rules of Court, 2021 were established with the express intent of not only effectively laying out the procedures for civil and appellate proceedings, but also of ensuring fair access to justice, swift resolution of cases, cost-effective work, effective use of court resources, and results that are just and practical as well as meet the needs of the parties. Additionally, a judgment on merits would also assist the Court in further setting aside proceedings, if any arise. It may be argued that the ordinary route i.e. the ex parte trial route would have ensured better procedural compliance and would have also ensured that all the evidence was on the stage while delivering a judgment on merits. But with this decision¹⁸ the Singapore Court has not only prevented abuse of procedural irregularities by the defendant but also prevented injustice that would have been caused to the plaintiff while enforcing the judgment in Indian jurisdiction. The Singapore Court has voluntarily taken into account a shorter route while still adhering to the fundamental common law norms. This approach provides a path for easy enforceability in other jurisdictions and also encourages informed and well-considered decisions by the parties.