Messer Griesheim Gmbh (Now Called Air Liquide Deutschland Gmbh) vs Goyal Mg Gases Private Limited

2026 INSC 401 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2026 ARISING OUT OF SLP (C) NO. 4774 OF 2023

MESSER GRIESHEIM GMBH (NOW CALLED AIR LIQUIDE DEUTSCHLAND GMBH) ...APPELLANT(S)

VERSUS

GOYAL MG GASES PRIVATE LIMITED …RESPONDENT(S)

JUDGMENT

Contents I. Introduction ........................................................................................................... 2 II. Facts ...................................................................................................................... 3 III. Judgment of the English Court and the Execution Proceedings initiated by Appellant ................................................................................................................... 7 IV. Analysis of the Impugned Order ...................................................................... 10 V. Submissions ....................................................................................................... 11 A. On behalf of the Appellant............................................................................. 11 B. On behalf of Respondent............................................................................... 14 VI. Statutory Scheme Governing Enforcement of Foreign Judgments ............. 16 VII. Issues for consideration ................................................................................. 20 Re: Issue I. Whether the judgment of the English Court is in consonance with the requirements of Section 13 of CPC read with 44A. ................................... 20 Signature Not Verified

Re: Issue II. Whether the judgment is unenforceable in view of the conditions Digitally signed by KAPIL TANDON

imposed by RBI in exercise of the statutory power under FERA ................... 39 Date: 2026.04.21 18:29:31 IST Reason:

(i) Findings of the English Court on RBI communication dated 03.09.1997 ........................................................................................................ 47 Page 1 of 61

(ii) Findings of the Single Judge .............................................................. 47

(iii) Findings of the Division Bench ........................................................... 48

(iv) True import of Section 47, FERA and RBI conditions dated 03.09.1997…………………………………………………………………………… 50

(v) The stage at which the RBI permission is required .......................... 52 VIII. Conclusions .................................................................................................... 61

I. Introduction

1. Leave granted.

2. This civil appeal is against the judgment and order passed by the

Division Bench of the High Court of Delhi 1, refusing to enforce a foreign

judgment passed by the High Court of Justice, Queens Bench Division

(English Court) for being non-compliant of the requirements of Section 13

of the Code of Civil Procedure, 1908 (CPC). Two questions have arisen

for our consideration. The first relates to the enforceability of the summary

judgment on the ground that it violates principles of natural justice for not

giving sufficient opportunity to the respondent/defendant. The second

relates to the bar of enforcement in view of the conditional prior permission

given by the Reserve Bank of India (RBI) under the repealed Foreign

Exchange Regulation Act, 1973 (FERA).

2.1 For the reasons to follow, we have explained how shifting from its

‘default judgment’ to a summary jurisdiction and proceeding to decree the

1 In EFA(OS) No. 3/2014, dated 21.12.2022. Page 2 of 61 suit filed by appellant, after dismissing the respondent’s application for

leave to defend has denied fair trial to respondent, thereby rendering the

foreign judgment unenforceable as per Section 13 CPC. We have thus

upheld the decision of the Division Bench and dismissed the Civil Appeal.

2.2 In this view of the matter, the other question did not arise for

consideration. However, in order to clarify the position of law and in view

of the detailed submissions of learned counsels, we answered the issue

and held that under Section 47 of FERA, there is a distinction between the

‘legal proceedings being brought in India’ and ‘no steps shall be taken for

the purpose of enforcing.’ While there is no prohibition for initiating legal

proceedings, but before taking necessary steps for enforcement of the

decree, permission of the Central Government/RBI is necessary. In other

words, while there is no bar for Courts to determine and adjudicate the

liability, its enforcement will be subject to the regulatory regime of the

State. This interpretation balances the values of access to justice and the

regulatory control. To this extent, the judgment of the High Court stands

reversed on the principle of law as it applied at the relevant time.

II. Facts

3. The dispute originates from a Share Purchase and Co-operation

Agreement (SPCA) executed on 12.05.1995 between the appellant, a

foreign company and the respondent, an Indian Company, for establishing

Page 3 of 61 a joint venture company in India for manufacturing and conducting

business in industrial gases. Subsequently, by an addendum dated

07.11.1996, the appellant’s shareholding was increased from 30% to 49%,

and three nominee directors were appointed to the respondent’s Board.

On the same day, parties also entered into a Technical Collaboration

Agreement relating to the supply of helium gas.

4. At a Board meeting, the respondent made a decision to obtain

overseas borrowing for financing the acquisition of plants and machinery,

and the nominee directors of the appellant assured the arrangement of

such funds. This agreement fructified in arranging such funding through

Citibank UK (lender Bank), which sanctioned External Commercial

Borrowing (ECB) facility up to USD 7 million. The lender bank’s sanction

was subject to the respondent obtaining necessary approvals from the

Government of India and the RBI. That was a time when foreign exchange

was regulated under the FERA.

5. On 02.04.1997, the Government of India granted permission for the

ECB and directed the respondent to obtain RBI approval under the FERA.

The permission stipulated that, “no additional foreign exchange liability,

either express or implied, is being assumed under the arrangements.”

Thereafter, RBI granted an in-principle approval on 28.05.1997, subject to

compliance with the Government’s conditions and final RBI approval.

Page 4 of 61

6. On 30.06.1997, the respondent executed the Loan Agreement with

Citibank N.A., London, and the appellant irrevocably and unconditionally

guaranteed the due repayment and performance of all obligations of the

borrower and undertook to pay, upon first demand, any amount due and

payable by the borrower but remaining unpaid.

7. The Agreement provided that it would be governed by English law 2,

and also that the parties submitted to the jurisdiction of the English Courts

for adjudication of disputes, waived objections to such forum, and

consented to the enforcement and execution of any judgment passed

against their properties. 3 It was further stipulated that any judgment

obtained in England would be recognized and enforced, subject to the

provisions of Section 13 of CPC in case of enforcement in India. 4 The

2 Clause 31.1 English Law: This Agreement shall be governed by, and shall be construed in

accordance with English law.

3 Clause 31.2 English Courts: Each of the parties hereto irrevocably· agrees for the benefit of each of

the Agent, the Arranger and the Banks that the courts of England shall have jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of or in connection with this Agreement (respectively "Proceedings" and "Disputes") and, for such purposes irrevocably submits to the jurisdiction of such courts. 31.3 Appropriate Forum: Each of the Obligors irrevocably waives any objection which it might now or hereafter have to the courts referred to in Clause 31.2 (English Courts) being nominated as the forum to hear and determine any Proceedings and to settle any Disputes and agree not to claim that any such court is not a convenient or appropriate forum. Clause 31.3 Appropriate Forum: Each of the Obligors irrevocably waives any objection which it might now or hereafter have to the courts referred to in Clause 31.2 (English Courts) being nominated as the forum to hear and determine any Proceedings and to settle any Disputes and agree not to claim that any such court is not a convenient or appropriate forum. Clause 31.6 Consent to Enforcement: Each of the Obligors hereby consents generally in respect of any Proceedings to the giving of any relief or the issue of any 'process in connection with such Proceedings including the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such proceedings.

4 Clause 12.5 Governing Law and Judgments: In any proceedings taken in its jurisdiction of

incorporation in relation to this Agreement, the. choice of English law as the governing law of this Agreement and any judgment obtained in England will be recognized and (subject, in the case of enforcement in India, to the provisions of section 13 of the Code of Civil Procedure 1908 of India) enforced.

Page 5 of 61 Obligors undertook to obtain and maintain all necessary authorisations

and approvals required under applicable laws to ensure the legality and

enforceability of the Agreement 5, and the Guarantor was entitled, upon

discharge of its obligations, to be subrogated to the rights of the lenders

against the Borrower. 6

8. On 24.07.1997, the Government of India recorded the loan

agreement and clarified that provisions inconsistent with its earlier

sanction would be void and not binding on the Government or RBI.

Subsequently, the RBI granted final approval on 12.08.1997 while leaving

the guarantee issue open. On 03.09.1997, the RBI permitted the

furnishing of a guarantee by the appellant, subject to two conditions: (i)

“There is no outgo of foreign exchange by way of any fee, direct or indirect,

for the proposed guarantee” and (ii) “in case of invocation of guarantee,

no liability whatsoever will extend to the Indian Company.”

9. During the period of 1997-1998, certain disputes concerning the

acquisition of another company by the appellant, which, according to the

respondent, was in violation of a non-compete clause contained in the

5 Clause 14.1 Maintenance of Legal Validity: Each of the Obligors shall be obtain, comply with the

terms of and do all that is necessary to maintain in full force and effect all authorisations, approvals, licences and consents required in or by the laws and regulations of its jurisdiction of incorporation to enable it lawfully to enter into and perform its obligations under this Agreement and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of this Agreement.

6 Clause 16.12 Subrogation: When the Guarantor has met its obligations in full under this guarantee

and indemnity, it shall be subrogated· to the rights under this Agreement of the Banks and Agent against the Borrower.

Page 6 of 61 SPCA, arose between the parties. Litigation ensued before the Bombay

High Court and Delhi High Court, however, details of such disputes are

not relevant for the present purposes.

10. While the parties were engaged in multiple proceedings across

judicial forums, the lender-bank, on 08.10.2001, invoked the guarantee

against the appellant due to default in repayment by the respondent. The

appellant promptly discharged the outstanding liability amounting to USD

4.78 million together with interest on 09.10.2001 and demanded

reimbursement by invoking the subrogation clause of the loan agreement.

Respondent failed to make payment and asserted that the amount paid

was in partial discharge of other liabilities owed by the appellant to the

respondent and not under subrogation rights.

III. Judgment of the English Court and the Execution Proceedings initiated by Appellant:

11. On 17.01.2003, the appellant instituted proceedings before the

English Court seeking recovery of the amount paid under the guarantee.

Respondent did not enter appearance or file a reply, and consequently, on

06.02.2003, the English Court passed a default judgment directing

payment of USD 5,120,833.56 with interest at 8% per annum along with

costs.

Page 7 of 61

12. Thereafter, on 25.03.2003, the appellant issued a statutory notice

under Sections 433(e) read with 434(1)(a) of the Companies Act, 1956,

seeking winding up of the respondent-company based on the default

judgment. The respondent replied, contending that the foreign judgment

was not enforceable in India as it was passed ex parte and did not

constitute a judgment on the merits under Indian law.

13. Faced with the situation of unenforceability, the appellant applied for

the setting aside of the default judgment and requested the passing of a

summary judgment on the merits as per the rules of the UK High Court.

Respondent being duly served, contested the invocation of proceedings

before the English Court and contended that it has good defences on

merits and that, the adjudication should not be under summary

jurisdiction. Further, the respondent also contested that the default

judgment should not be set aside.

14. On 07.02.2006, the English Court, however, passed a summary

judgment against the respondent after setting aside the earlier default

judgment. Respondent was directed to pay USD 5,824,564.74 and Euro

31,364.74 together with interest at 8% per annum and costs of 90,000

Pounds. No appeal was filed by the respondent against the said judgment.

15. Thereafter, on 21.02.2006, the appellant sold its entire 49%

shareholding in the respondent company to existing shareholders,

Page 8 of 61 resulting in the respondent ceasing to be a joint venture company. On

26.04.2006, the appellant filed an execution petition before the Delhi High

Court under Section 44A of the CPC seeking execution of the UK decree

in India. A winding-up petition was also filed to enforce the decretal sum.

16. By judgment dated 29.11.2013, the learned Single Judge of the

Delhi High Court dismissed the respondent’s objections under Section 13

of CPC and held that the English Court’s judgment was passed on merits

and was enforceable in India. The Court also directed the respondent to

pay the decretal sum within twelve weeks and to secure the amount by

depositing title deeds of property free from encumbrances.

17. Aggrieved by the dismissal of the objections, the respondent filed

an appeal before the Division Bench, which by judgment dated

01.07.2014, held that the Delhi High Court was not a “District Court” under

Section 44A CPC and, therefore, lacked jurisdiction to execute the foreign

decree. Accordingly, the execution petition was directed to be transferred

to the competent District Court and the objections were to be decided

afresh. The said judgment was challenged before this Court.

18. By judgment dated 28.01.20227 this Court set aside the judgment

dated 01.07.2014, and held that jurisdiction to execute foreign decrees

under Section 44A vests in the Delhi High Court in exercise of its original

7 Griesheim GmbH v. Goyal MG Gases (P) Ltd., (2022) 11 SCC 549.

Page 9 of 61 civil jurisdiction. The appeal before the Division Bench was restored for

decision on merits.

IV. Analysis of the Impugned Order

19. The Division Bench of the Delhi High Court heard the appeal, and

by its judgment dated 21.12.2022, the appeal was allowed, and the order

dated 29.11.2013 of the Single Judge was set aside.

20. By the order impugned before us, it was held that the foreign

judgment was contrary to the provisions of law in force in India and had

been rendered without consideration of material evidence, thereby

attracting the bar under Section 13 of CPC. Upon examination of the

Balance Sheets and Minutes of the Meetings of the Board of Directors

dated 27.05.2002 and 31.01.2003, the Division Bench observed that

repayment of the loan by the appellant and its treatment as an adjustment

against the claims of the respondent had been expressly recorded therein.

It was further noted that the said documents were duly approved in

meetings attended by the nominee director of the appellant, who had

signed and seconded the resolutions, and that in view of Sections 211 and

215 of the Companies Act, 1956, such Balance Sheets were required to

present a true and fair view of the financial position of the company,

thereby indicating that no liability remained due from the respondent to

the appellant.

Page 10 of 61

21. The Division Bench further held that the English Court, while

passing summary judgment, had failed to consider material evidence,

including the aforesaid Balance Sheets, Minutes of Meetings and relevant

correspondence, particularly the e-mail dated 20.02.2003 issued by the

respondent disputing the alleged liability. It was also held that the

conditions imposed by the RBI in its approval dated 03.09.1997, including

the stipulation that no liability would be fastened upon the respondent

upon invocation of the guarantee, continued to govern the transaction.

The Division Bench observed that the English Court had neither taken into

account binding conditions nor the applicable legal regime prevailing at

the relevant time. In this view of the matter, the Division Bench held that

the foreign judgment does not satisfy the requirement of Section 13 of the

CPC for enforcement in India.

V. Submissions A. On behalf of the Appellant

22. Learned senior counsel Dr A.M. Singhvi commenced his argument

by stating that this case serves as a classic example of the old saying that

the difficulties of the litigant in India begin when he has obtained a decree.

The submissions of the learned senior counsel can be formulated as

follows:

Page 11 of 61

22.1 Decree passed by the English Court was valid, binding and

enforceable in India, and did not fall within any of the exceptions

enumerated under Section 13 of the CPC. It was contended that upon

discharge of the outstanding loan liability pursuant to invocation of the

guarantee, the appellant became subrogated to the rights of the lender

under the Loan Agreement and was therefore entitled to recover the

amounts paid from the respondent.

22.2 The English Court was a court of competent jurisdiction, as the Loan

Agreement expressly provided that English law would govern the contract

and that disputes would be subject to the jurisdiction of the English Courts.

Respondent voluntarily submitted to the jurisdiction of the English Court

and participated in the proceedings without objecting to jurisdiction.

Respondent is estopped from raising any objections as regards the

judgment, decree and enforceability of the foreign judgment.

22.3 Decree passed by the English Court was a judgment on merits,

rendered after consideration of pleadings and evidence, and therefore did

not attract the bar under Section 13(b) of CPC. It was submitted that mere

adoption of a summary procedure or absence of cross-examination would

not render the decree opposed to natural justice, particularly when the

respondent had been afforded sufficient opportunity to contest the

proceedings.

Page 12 of 61 22.4 Further, the decree was not contrary to Indian law and did not violate

the provisions of the FERA or any RBI conditions. It was contended that

even assuming that regulatory permissions were required, such

permission could be obtained at the stage of remittance and not prior

thereto. 8 It was also urged that the repeal of the FERA and its replacement

by the Foreign Exchange Management Act indicated a liberalised regime

governing foreign exchange transactions, thereby removing any

impediment to the enforcement of the decree.

22.5 RBI had issued subsequent circulars granting general permission

for repayment by an Indian borrower to a foreign guarantor, and that such

circulars superseded earlier conditional approvals relied upon by the

respondent. Learned senior counsel contended that the conditions

imposed by the RBI were regulatory in nature and did not extinguish the

contractual rights of subrogation arising in favour of the appellant upon

payment under the guarantee.

22.6 Appellant also denied that the Balance Sheets and financial

statements of the respondent constituted any admission of non-liability. It

was submitted that the appellant had consistently recorded dissent to the

treatment of the loan in the financial statements and had sought

8 For the purpose he relied on the decision of this Court in Renusagar Power Co. vs. General Electric

(1994) Supp. (1) SCC 644; LIC Vs. Escort (1986) 1 SCC 264.

Page 13 of 61 reconstitution of the Board and an independent audit of accounts. It was

urged that objections relating to findings of fact by the English Court could

not be raised in execution proceedings in India once the foreign judgment

had attained finality.

22.7 Lastly, it was stated that an executing court cannot go behind the

decree.

B. On behalf of Respondent

23. Learned senior counsel, Mr P. Chidambaram, appeared on behalf

of the respondent and supported the conclusions drawn by the Division

Bench of the High Court of Delhi, holding that the foreign decree is

unenforceable under Section 13 read with Section 44A of CPC. Details of

his submissions are as follows:

23.1 The primary submission is that the judgment of the English Court is

not enforceable in India, as it is contrary to the provisions of Section 13 of

the CPC. It is contended that fastening liability upon the respondent

pursuant to the invocation of the guarantee is in violation of the statutory

permissions granted by the RBI under the FERA, 1973, which expressly

stipulated that no liability would extend to the Indian company in the event

of the invocation of the guarantee.

Page 14 of 61 23.2 The English Court had ignored the mandatory provisions of Indian

law, including the conditions imposed by the RBI, while granting approval

for the loan transaction. Such permissions formed an integral part of the

transaction and were binding upon the parties, and that disregard of those

statutory conditions rendered the foreign judgment liable to be refused for

enforcement under Section 13(c) and Section 13(f) of the CPC.

23.3 Provisions of FERA continued to apply notwithstanding its repeal,

as the permissions granted thereunder were preserved under the savings

clause contained in the Foreign Exchange Management Act, 1999

(FEMA). It is further submitted that any transaction undertaken in violation

of mandatory permissions granted under the earlier regime would remain

unenforceable in law.

23.4 Balance sheets and financial statements of the respondent for the

relevant years clearly reflect that there exists no subsisting liability upon

the respondent, and that the relevant documents were duly approved and

signed by the concerned parties, including the nominee director of the

appellant. He would submit that under the provisions of the Companies

Act, 1956, such financial statements constituted an admission of the

financial position of the company and could not be disregarded while

determining liability.

Page 15 of 61 23.5 Judgment of the English Court was not rendered on the merits, and

the respondent was not afforded an adequate opportunity to defend the

proceedings. Learned senior counsel contended that the absence of a full

trial, including opportunity for cross-examination, and the summary nature

of the proceedings resulted in a violation of principles of natural justice.

23.6 RBI circulars dated 01.07.2013 and 10.12.2021, relied upon by the

appellant, are inapplicable as they pertain only to cases where the creditor

bank is in India, and the creditor bank in the present case is in England.

Nonetheless, even if the abovementioned circulars were applicable, the

specific permission issued by the RBI in exercise of its statutory powers

has statutory force and would not be considered rescinded by the general

circular.

23.7 Judgment of the English Court is in violation of Indian laws, namely

the FERA, the Companies Act and the RBI directions that have force of

law in India, hence on this ground alone the enforcement of the foreign

judgment must be denied.

VI. Statutory Scheme Governing Enforcement of Foreign Judgments:

24. The statutory framework governing the recognition and enforcement

of foreign judgments in India is principally contained in Sections 2(5), 2(6),

13, 14, and 44A of the CPC. Section 2(6) defines a “foreign judgment” as

Page 16 of 61 the judgment of a foreign court, while Section 2(5) defines a “foreign court”

as a court situated outside India and not established by the authority of

the Central Government.

25. The procedural mechanism for the execution of foreign decrees is

primarily governed by Section 44A CPC, which provides a special mode

for the enforcement of decrees passed by superior courts of reciprocating

territories. Under sub-section (1) of Section 44A, a certified copy of a

decree passed by a superior court of a reciprocating territory may be filed

in a District Court in India, and the decree may thereafter be executed as

if it had been passed by the District Court itself. The expression

“reciprocating territory” under Section 44A refers to any country or territory

outside India which the Central Government may, by notification in the

Official Gazette, declare to be a reciprocating territory for the purposes of

the section.

26. The enforcement of a foreign decree can be refused if it is shown to

the satisfaction of the Court that the decree falls within any of the

exceptions specified in clauses (a) to (f) of Section 13. Section 13 is

reproduced herein for ready reference:

“13. When foreign judgment is not conclusive.—A foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title, except— Page 17 of 61

(a) where it has not been pronounced by a Court of competent jurisdiction;

(b) where it has not been given on the merits of the case;

(c) where it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable;

(d) where the proceedings in which the judgment was obtained are opposed to natural justice;

(e) where it has been obtained by fraud;

(f) where it sustains a claim founded on a breach of any law in force in India.”

27. The legislative intent underlying Section 13 reflects the principle of

comity of courts and recognition of final adjudications rendered by

competent foreign tribunals, subject only to narrowly construed

exceptions. 9 The principles governing conclusiveness under Section 13

CPC may broadly be summarised as follows:

(a) Court of competent jurisdiction: A foreign judgment is not conclusive

unless it is pronounced by a court of competent jurisdiction, both under

the law of the foreign country and in the international sense recognised

under private international law. 10

(b) Judgment to be on Merits: A judgment must be rendered on merits,

meaning that the court must have considered the evidence and

adjudicated upon the substantive rights of the parties. A decree passed

9 Alcon Electronics (P) Ltd. v. Celem S.A. of France, (2017) 2 SCC 253. 10 R. Viswanathan vs Rukn-Ul-Mulk Syed Abdul Wajid, 1962 SCC OnLine SC 112.

Page 18 of 61 mechanically, by default, or without examination of the objections would

not be conclusive. 11

(c) Incorrect View of International Law or Refusal to Recognise Indian

Law: A foreign judgment would not be conclusive where it is founded on

an incorrect view of international law or refuses to recognise the law of

India in cases where such law is applicable. 12

(d) Proceedings Opposed to Natural Justice: A judgment rendered in

violation of principles of natural justice, including absence of proper notice

or denial of opportunity of hearing, is not enforceable. The requirement of

natural justice relates to procedural fairness and not to the correctness of

the decision on merits. 13

(e) Judgment Obtained by Fraud: foreign judgment obtained by fraud is

not entitled to recognition, and the fraud contemplated includes not only

fraud on merits but also fraud relating to jurisdictional facts. 14

(f) Judgment Sustaining a Claim Founded on Breach of Indian Law:

foreign judgment sustaining a claim that is contrary to Indian law in force

shall not be recognised or enforced in India.

11 Alcon Electronics (P) Ltd (supra); China Shipping Development Co. Ltd. v. Lanyard Foods Ltd., (2008)

142 Comp Cas 647.

12 Y. Narasimha Rao v. Y. Venkata Lakshmi, (1991) 3 SCC 451. 13 Sankaran Govindan v. Lakshmi Bharathi, (1975) 3 SCC 351; R. Viswanathan (supra). 14 Satya v. Teja Singh, (1975) 1 SCC 120.

Page 19 of 61 VII. Issues for consideration

28. On the basis of the submissions advanced by the appellant and the

respondent, two broad issues arise for consideration.

I. Whether the judgment of the English Court is in consonance with

the requirements of Section 13 of CPC read with 44A.

II. Whether the judgment is rendered unenforceable in view of the

conditions imposed by RBI in exercise of the statutory power under

FERA.

Re: Issue I. Whether the judgment of the English Court is in consonance with the requirements of Section 13 of CPC read with 44A.

29. As already indicated, pursuant to the permission granted by RBI,

Citibank disbursed the loan on 28.10.1997. It is a matter of record that

respondent even paid first two instalments on 23.09.1999 and 30.09.2000.

It is in this backdrop that the facts leading to initiation of the present legal

proceedings and concluding with the judgment impugned be required to

be examined in detail.

30. Certain disputes relating to alleged breaches of the SPCA and

TSSA, particularly concerning the non-compete clause, arose between

the appellant and the respondent. Around the same time, the appellant

seem to have expressed its intention to disinvest in India. In view of the

pending rights and liabilities of the parties, particularly in view of the

Page 20 of 61 alleged claim of approximately Rs. 500 Crore of the respondent against

the appellant, parties are stated to have arrived at a mutual understanding

that the appellant would discharge the respondent’s debt to the lender

bank, as a set off to the claims of the respondent.

31. It is the case of the respondent that instead of abiding by the terms

of the agreement, appellant initiated legal proceedings before the English

Court. This resulted in a default judgment dated 06.02.2003 directing the

respondent to pay USD 5,120,833.56 with interest at 8% per annum,

along with costs. Having realised the difficulty in enforcing a default

judgment, the appellant filed an application on 06.07.2005 seeking its

recall and for passing of a summary judgment. Consequently, the

application was accepted and summary proceedings were permitted.

32. Before the English Court, the respondent raised various defences,

including those relating to the three agreements said to be subsisted

between the parties. These defences are also recorded in the UK

judgment and are reproduced hereinbelow for ready reference:

"Defences"

“10. In reaching decisions on both applications, I think it essential first to consider the merits of Goyal's response to the substance of the claim made by Messer under the loan agreement. The basis of the response is to be found in two witness statements made by Mr Dhar, now the Deputy General Manager of Goyal. Goyal rely on three separate alleged agreements, albeit Mr Nash, counsel for Goyal, made it clear that the first was not put forward at the present hearing as itself providing any defence to the claim by Messer and the third is of more direct relevance to Page 21 of 61 the exercise of the court's discretion in deciding whether or not to set aside the default judgment.

11. The first agreement is said to have been made orally at a meeting of Goyal' s board on 13 June 1997, and so some 2 weeks before the loan agreement was executed. Mr Dhar' s evidence is that it was then agreed that, in the event that Messer was called upon to pay under the proposed guarantee to be given to Citibank, it would not have recourse to either the other shareholders in Goyal or Goyal. I shall refer to this alleged agreement as "the June 1997 non-recourse agreement”.

12. The second ( also oral) agreement is said to have been made in August and September 2001. Messer is alleged to have agreed to pay the amounts outstanding under the loan agreement and not to look for repayment from Goyal. In April 2001, Goyal's lawyers in India had written to Messer making unspecified allegations of breaches by Messer of both the SPCA and the TSSA and claiming INR 5 billion (some US $ 111m) in damages. Mr Dhar's evidence is that he and Mr Goyal (representing the Indian shareholders of Goyal) had discussed the claim by Goyal in August and September 2001 with a Mr Allcock, one of Messer's nominated directors on the board of Goyal. Mr Dhar says that Mr Allcock wanted to reach a compromise and Messer was prepared to compensate Goyal and to continue with the joint venture. Mr Dhar continued:

"We discussed the settlement of Goyal' s claims against Messer, Goyal made it clear that it would only be prepared to settle the claims if Messer accepted responsibility for the balance owed by Goyal under the Loan Agreement. This was of critical importance to Goyal because a large proportion of that loan had been invested in assets which had to be written off after the disputes with Messer had arisen…. In return, Goyal would be responsible for the domestic borrowing and Goyal and the Goyal shareholders would not pursue certain claims against Messer. This deal was agreed between Mr Goyal and myself on behalf of the Goyal shareholders and Mr Allcock on behalf of Messer in September 2001. The parties proceeded with the joint venture in good faith. The agreement set out above was considered by the Goyal shareholders to be a sensible commercial deal that would avoid further litigation with Messer. It was agreed that the particulars of this agreement would be discussed and finalised after Mr Allcock had discussed with his colleagues what was required to formalise the agreement.”

13. I shall refer to this alleged agreement as the September 2001 Agreement.

Page 22 of 61

14. The third agreement (also oral) on which Goyal (by Mr Dhar's evidence) relies is an agreement, or at least a representation, by Messer prior to the commencement of the proceedings in this court, that the proceedings were being brought for Messer’s own internal purposes and, whilst they would culminate in a default judgment, that judgment would not be enforced. I shall refer to this alleged agreement as the December 2002 Agreement.

15. It is Mr Foxton’s submission, on behalf of Messer, that these alleged agreements are "so lacking in credibility and cogency, and so inconsistent with the verifiable facts, that they cannot begin to justify a refusal to set aside the default judgment” nor provide, should it prove to be material, any real prospect of a successful defence to Messer's claim under CPR 24.2. I agree, I must therefore set out as succinctly but, I hope, sufficiently as I can my reasons for that conclusion.”

33. The English Court proceeded to pronounce summary judgment after

rejecting the respondent’s application for leave to defend. It would be

apposite, before proceeding further, to reproduce the operative portion of

the judgment rendered by the English Court:

“Summary Judgment

54. I have already addressed such defences as Goyal has sought to raise. None, in my judgment, provide any real prospect of a defence to the claim succeeding. Messer is entitled to summary judgment. No issues have been raised on the amount of the claim. At 16 January 2006 the claim was for the principal sum of US$ 4,794,762.98 together with interest calculated in accordance with the loan agreement of US$ 996,842.94. A small further amount of interest will be due when this judgment is handed down. There is also a claim under clause 17.5 of the loan agreement to recover certain legal fees. If there are any points to be made on the precise amount of the Part 24 judgment to be entered they should be raised when this judgment is handed down if they cannot be agreed beforehand.”

34. The principles relating to foreign determination acquiring the status

of enforceability under Section 13 CPC is well articulated in the decision Page 23 of 61 of this Court in, Alcon Electronics (P) Ltd. v. Celem S.A. of France15, this

Court noted that:

“14. A plain reading of Section 13 CPC would show that to be conclusive an order or decree must have been obtained after following the due judicial process by giving reasonable notice and opportunity to all the proper and necessary parties to put forth their case. When once these requirements are fulfilled, the executing court cannot enquire into the validity, legality or otherwise of the judgment.

16….. A judgment can be considered as a judgment passed on merits when the court deciding the case gives opportunity to the parties to the case to put forth their case and after considering the rival submissions, gives its decision in the form of an order or judgment, it is certainly an order on merits of the case in the context of interpretation of Section 13(c) CPC.”

35. Reference must also be made to observations of this Court in

Sankaran Govindan v. Lakshmi Bharathi 16 where it was held as under;

“40….. The expression “contrary to natural justice” has figured so prominently in judicial statements that it is essential to fix its exact scope and meaning. When applied to foreign judgments, it merely relates to the alleged irregularities in procedure adopted by the adjudicating court and has nothing to do with the merits of the case. If the proceedings be in accordance with the practice of the Foreign court but that practice is not in accordance with natural justice, this Court will not allow it to be concluded by them. In other words, the courts are vigilant to see that the defendant had not been deprived of an opportunity to present his side of the case. The wholesome maxim audi alteram partem is deemed to be universal, not merely of domestic application, and therefore, the only question is, whether the minors had an opportunity of contesting the proceedings in the English court…”

15 (2017) 2 SCC 253.

16 (1975) 3 SCC 351.

Page 24 of 61

36. Further, this Court has taken a view in International Woollen Mills v.

Standard Wool (U.K.) Ltd. 17 that;

“17. ….To say that a decree has been passed regularly is completely different from saying that the decree has been passed on merits. An ex parte decree passed without consideration of merits may be a decree passed regular if permitted by the rules of that court. Such a decree would be valid in that country in which it is passed unless set aside by a court of appeal. However, even though it may be a valid and enforceable decree in that country, it would not be enforceable in India if it has not been passed on merits.

18. In the case of Middle East Bank Ltd. v. Rajendra Singh Sethia a decree had been passed ex parte and without service of notice on the judgment-debtor. A number of authorities were cited before the Court including the case of Abdul Rahim. The Court held that even though a decree may be ex parte it may still be on merits provided it could be shown that the court had gone through the case made out by the plaintiff and considered the same and taken evidence of the witnesses put up by the plaintiff. It was held that if an ex parte decree was passed in a summary manner under a special procedure without going into the merits and without taking evidence then those decrees would not be executable in India. Based on this authority it was submitted that a decree could be said to be not on merits only if it is passed in a summary manner in any special or summary procedure. It was submitted that such a decree i.e. a decree which has not been passed in a summary manner in a summary proceeding would be a decree on merits. This authority itself makes it clear that the decree would not be on merits if the court has not gone through and considered the case of the plaintiff and taken evidence of the witnesses of the plaintiff. It must also be noted that in this case the Court ultimately held that the decree concerned was not a decree on merits.” (emphasis supplied)

37. In the execution proceedings, Ld. Single Judge took the view that

the summary judgment of the English Court was pronounced after hearing

17 (2001) 5 SCC 265.

Page 25 of 61 the parties and after examining the witness statements. However, the

Division Bench, by the order impugned before us observed as under;

“ 63. ….By not affording an opportunity to appellant/JD to defend its case, the English Court has not only deprived appellant/JD of its legitimate rights to defend itself but also it is against the interest of justice. Even if it is taken that the appellant’s case was premised on weak foundation; at least an opportunity to stand before the Court should have been afforded to the appellant/JD.”

(emphasis supplied)

38. We must also make a reference to the decision of this Court in IDBI

Trusteeship Services Ltd. v. Hubtown Ltd. 18 wherein principles relating to

grant of leave to defend after amendment of Order XXXVII Rule 3 CPC

have been formulated in the following manner:

“17. Accordingly, the principles stated in para 8 of Mechelec case [will now stand superseded, given the amendment of Order 37 Rule 3 and the binding decision of four Judges in Milkhiram case , as follows:

17.1. If the defendant satisfies the court that he has a substantial defence, that is, a defence that is likely to succeed, the plaintiff is not entitled to leave to sign judgment, and the defendant is entitled to unconditional leave to defend the suit. 17.2. If the defendant raises triable issues indicating that he has a fair or reasonable defence, although not a positively good defence, the plaintiff is not entitled to sign judgment, and the defendant is ordinarily entitled to unconditional leave to defend. 17.3. Even if the defendant raises triable issues, if a doubt is left with the trial Judge about the defendant's good faith, or the genuineness of the triable issues, the trial Judge may impose conditions both as to time or mode of trial, as well as payment into court or furnishing security. Care must be taken to see that the object of the provisions to assist expeditious disposal of commercial causes is not defeated. Care must also be taken to see that such triable issues are not shut out by unduly severe orders as to deposit or security.

18 (2017) 1 SCC 568

Page 26 of 61 17.4. If the defendant raises a defence which is plausible but improbable, the trial Judge may impose conditions as to time or mode of trial, as well as payment into court, or furnishing security. As such a defence does not raise triable issues, conditions as to deposit or security or both can extend to the entire principal sum together with such interest as the court feels the justice of the case requires.

17.5. If the defendant has no substantial defence and/or raises no genuine triable issues, and the court finds such defence to be frivolous or vexatious, then leave to defend the suit shall be refused, and the plaintiff is entitled to judgment forthwith.

17.6. If any part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit, (even if triable issues or a substantial defence is raised), shall not be granted unless the amount so admitted to be due is deposited by the defendant in court.”

39. Further, following IDBI (supra), this Court in B.L. Kashyap & Sons

Ltd. v. JMS Steels and Power Corporation19 reiterated the principles in

following manner:

“33. It is at once clear that even though in IDBI Trusteeship , this Court has observed that the principles stated in para 8 of Mechelec Engineers case shall stand superseded in the wake of amendment of Rule 3 of Order 37 but, on the core theme, the principles remain the same that grant of leave to defend (with or without conditions) is the ordinary rule; and denial of leave to defend is an exception. Putting it in other words, generally, the prayer for leave to defend is to be denied in such cases where the defendant has practically no defence and is unable to give out even a semblance of triable issues before the court. 33.2. Thus, it could be seen that in the case of substantial defence, the defendant is entitled to unconditional leave; and even in the case of a triable issue on a fair and reasonable defence, the defendant is ordinarily entitled to unconditional leave to defend. In case of doubts about the intent of the defendant or genuineness of the triable issues as also the probability of defence, the leave could yet be granted but while imposing conditions as to the time or mode of trial or payment or furnishing security. Thus, even in such cases of doubts or

19 (2022) 3 SCC 294.

Page 27 of 61 reservations, denial of leave to defend is not the rule; but appropriate conditions may be imposed while granting the leave. It is only in the case where the defendant is found to be having no substantial defence and/or raising no genuine triable issues coupled with the court's view that the defence is frivolous or vexatious that the leave to defend is to be refused and the plaintiff is entitled to judgment forthwith. Of course, in the case where any part of the amount claimed by the plaintiff is admitted by the defendant, leave to defend is not to be granted unless the amount so admitted is deposited by the defendant in the court.

33.3. Therefore, while dealing with an application seeking leave to defend, it would not be a correct approach to proceed as if denying the leave is the rule or that the leave to defend is to be granted only in exceptional cases or only in cases where the defence would appear to be a meritorious one. Even in the case of raising of triable issues, with the defendant indicating his having a fair or reasonable defence, he is ordinarily entitled to unconditional leave to defend unless there be any strong reason to deny the leave. It gets perforce reiterated that even if there remains a reasonable doubt about the probability of defence, sterner or higher conditions as stated above could be imposed while granting leave but, denying the leave would be ordinarily countenanced only in such cases where the defendant fails to show any genuine triable issue and the court finds the defence to be frivolous or vexatious.” (emphasis supplied)

40. Even while a Court adjudicates and determines a lis in summary

jurisdiction, the Court must determine whether the defendant has a

“realistic”, as opposed to a merely “fanciful” prospect of success. A claim

can be regarded as realistic only where it carries a degree of conviction

and is more than merely arguable. At the same time, the jurisdiction to

grant summary judgment is not intended to convert the proceeding into a

“mini-trial”, but rather to enable cases where there is no real prospect of

success to be disposed of summarily. Nevertheless, the court is not

required to accept factual assertions at face value without analysis,

Page 28 of 61 particularly where such assertions are contradicted by contemporaneous

records. In forming its opinion, the court must consider not only the

material actually placed before it at the summary stage but also such

evidence as may reasonably be expected to be available at trial. Further,

even where a matter does not initially appear complex or where no

immediate conflict of fact is evident, the court ought to exercise caution in

rendering a final determination without trial if reasonable grounds exist to

believe that a fuller investigation into the facts may materially affect the

outcome of the case.

41. We may now advert to the issue as to whether a judgment passed

by a Foreign Court in a summary manner, by refusing to grant leave to

defend, can be regarded as having been rendered “on the merits”. A

decree passed by Foreign Court may be treated as having been rendered

“on the merits” where the Court has applied its mind to the substantive

issues of the case. Conversely, where a decree is passed without any

investigation into merits, it cannot be said to have been rendered “on the

merits” within the meaning of Section 13(b) of the CPC. The Privy Council

in Daniel Thomas Keymer v. P. Viswanatham Reddi20 dealt with the issue

whether a decree passed by the Foreign Court, in a case, where the

defence was struck off, could be treated as one rendered on the merits.

20 AIR 1916 PC 121.

Page 29 of 61 The Privy Council answered the said issue in the negative, holding that

such a decision could not be regarded as one on merits of the case within

the meaning of Section 13(b) of the CPC. The aforesaid legal proposition

was approved in L. Oppenheim and Co. v. Hajee Mahomed Haneef

Sahib 21, wherein it was held that the decision of the English Court

rendered in default of appearance, cannot be treated as one “on the

merits”. A similar view has been taken by Rajasthan High Court in O.P.

Verma v. Lala Gehrilal 22, by the Madras High Court in K.M. Abdul Jabbar

v. Indo-Singapore Traders (P) Ltd. 23, as well as by the Calcutta High Court

in Middle East Bank Ltd. v. Rajendra Singh Sethia24, which in our opinion,

lays down the correct principle of law.

21 AIR 1922 PC 120.

22 1960 SCC OnLine Raj 89.

“45. On an earnest and careful consideration of the provisions contained in this Order, we find it difficult to hold that a decree passed in a suit brought under these provisions without going into the merits of the case and because the defendant failed to appear or because he was not given leave to defend can be held to be a judgment on the merits of the case. The crucial consideration which persuades us to incline to this conclusion is that, in such a case, there is hardly any consideration of the contentions raided on behalf of the defendant and the judgment happens to be given more as a matter of form or technicality rather than after an investigation of the points involved.” (emphasis supplied)

23 1980 SCC OnLine Mad 186.

“7……Almost all the High Courts have taken a uniform view that a decree passed by a Court under the summary procedure after refusing leave to defend sought for by the defendant is not a judgment on merits. As a matter of fact, no decision of any Court has been cited before me by learned counsel for the first respondent taking a contrary view….” 24 1990 SCC OnLine Cal 247.

“51. The preponderance of judicial opinion as deducted from the decisions referred to above appears to be that a judgment or decree passed by a court under a summary procedure, where the Court has no occasion to determine the truth or falsity of contentions raised or which may be raised and a judgment will be entered in favour of the plaintiff merely because the defendant failed to appear or to apply for leave to defend or if applied, the leave was refused is a decree or judgment which cannot be held to have been given on merits.”

Page 30 of 61

42. Therefore, when the dispute before the Court is demonstrative of

the fact that the highly contested facts compel deeper scrutiny, disposal

of the case in summary jurisdiction would cause great prejudice to the

party seeking leave to defend. Not only in India, even under the law that

governs U.K. Courts, this principle is followed as per the practice and

procedure. Civil Procedure Rules CPR 24.2 specifies the grounds on

which summary judgment may be granted in the following manner:

"The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if-

(a) it considers that-

(i) that claimant has no real prospect of succeeding on the claim or issue; and

(ii) that defendant has no real prospect of successfully defending the claim or issue; and

(b) there is no other reason why the case or issue should be disposed of at a trial."

43. The principles to be adhered to in passing a summary judgment

have been crystallised in Easyair Ltd (t/a Openair) v Opal Telecom Ltd.25

in the following manner:

“I. The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman 26

25 [2009] EWHC 339 (Ch) 26 [2001] 2 All ER 91

Page 31 of 61 II. A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable. ED & F Man Liquid Products v Patel 27 III. In reaching its conclusion the court must not conduct a “mini-

trial”, it is to enable cases, where there is no real prospect of success either way, to be disposed of summarily: Swain v Hillman.

IV. This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10] V. However, in reaching its conclusion, the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond. 28 VI. Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co. 29 VII. On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. VIII. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the

27 [2003] EWCA Civ 472 at [8] 28 (No 5) [2001] EWCA Civ 550 29 100 Ltd [2007] FSR 63.

Page 32 of 61 case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better.

IX. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success.”

44. In resisting the claim as well as in the application for leave to defend,

respondent relied upon three agreements. The first of these agreements

is stated to have been concluded at a meeting of the respondent’s Board

on 13.06.1997, prior to execution of the loan agreement, whereby it was

allegedly agreed that in the event the appellant was required to discharge

its obligations under the proposed guarantee issued in favour of the

lending bank, it would not seek recourse against the respondent or its

shareholders. The second agreement was asserted to have been reached

during September 2001, in the backdrop of disputes arising from alleged

breaches of the SPCA and TSSA and consequent monetary claims raised

by the respondent against the claimant; under this arrangement, the

appellant was to assume responsibility for the outstanding loan liability in

consideration of settlement of claims and continuation of the joint venture,

while the respondent and its shareholders would refrain from pursuing

certain claims against the appellant. The third agreement, relied upon by

the respondent, was described as an understanding or representation

made prior to commencement of proceedings, to the effect that the

Page 33 of 61 proceedings were being initiated merely for internal purposes of the

claimant and that, although a default judgment might be obtained, the

same would not be enforced against the respondent.

45. We are not inclined to examine whether the defences set by the

respondent are sufficient in all respects or not. For our purposes, it is

sufficient to draw a conclusion as to whether the said defences are

realistic and not fanciful. Even as per the principles followed by the English

Court while exercising jurisdiction to grant summary judgment, the Court

cannot convert the proceedings into a mini trial. More than anything, when

the assertions are supported by contemporaneous documents and there

is every possibility to expect supporting oral and documentary evidence

from both sides, the Court will refrain from proceeding with summary

judgment. A word of caution is also that where a matter does not initially

appear complex or where no immediate conflict of fact is evident, the

Court must not proceed with summary determination without trial.

46. Respondent’s defences involved proof of oral agreements between

the parties and require detailed examination on the basis of oral as well

as documentary evidence. There are contemporaneous documentary

material in the form of Balance Sheets and Minutes of Board Meetings,

documents which carry statutory significance under Sections 19430, 210 31,

30 Section 194: Minutes to be evidence.

31 Section 210: Annual accounts and balance-sheet.

Page 34 of 61 211 32 and 21533 of the Companies Act, 1956. While we are not entering

into the merits of the defences, existence of such material documents with

presumptive value compels us to conclude that the respondent was

foreclosed without a full opportunity.

47. Further, the respondent contended that the Balance Sheet for the

financial year 2001-02 had been duly approved and signed by all

members of the Board of Directors, including Mr. Winfrid Schmidt, the

nominee Director representing the appellant. It was urged that Mr.

Schmidt had actively participated in the meetings of the Board and had

seconded the resolutions adopting the audited Balance Sheet and profit

and loss account. The entries contained in the Balance Sheet, particularly

those relating to the treatment of the ECB loan, recorded the company’s

position that no amount was payable to the appellant and that any demand

made by it lacked merit. Relevant portion of the Balance Sheet entry

pertaining to year 2001-02 is extracted as below:

'' 19. B (II) TREATMENT OF ECB LOAN REPAYMENT The Company had taken a term loan (in the form of ECB) of 7 Million US Dollars from Citibank International Plc, London that was guaranteed by Messer Griesheim GmbH (Messer). During the year Messer paid the entire outstanding amount of ECB Loan & Interest amounting to UCB 4. 78 million 4. 78 Million (equivalent to Rs. 2236 lacs approx.) i.e. principal USD 4. 66 million and interest USD 0.12 Million to Citibank, Plc London. Messer has made this payment pursuant to understanding with the Company to partially compensate the company for the loss

32 Section 211: Form and contents of balance-sheet and profit and loss account. 33 Section 215: Authentication of balance-sheet and profit and loss account.

Page 35 of 61 suffered by the company due to Messer 's non cooperation in implementing various projects and breach of certain clauses, of Share Purchase and Cooperation Agreement dt. 12-05-1995 between the Company and Messer.

As per Mutual understanding with Messer, the Company has adjusted Rs. 58 lacs in the Interest Expenses and Rs. 2078 lacs towards loss suffered by the Company in the value of its investment in Capital Work in Progress and balance amount of Rs. 100 lacs has been adjusted towards the Company's claim. of Rs. 50,000 lacs against Messer for the loss suffered by the Company on account of breach of certain clauses of Share Purchase and Cooperation Agreement dt. 12.05.1995.” (emphasis supplied)

48. Further, para-2 provided that:

"CONTINGENT LIABILITIES NOT PROVIDED FOR:

"(a) Guarantees given and letters of credit issued by bank on behalf of company Rs.287.94 lacs (Previous year 163.36 lacs)

(b) Contrary to the understanding with the Company, Messer Greisheim, GmbH, had made a demand on the company to make payment of the amount of USD 4.78 Million (equivalent to Rs. 2236 Lacs) being the amount of ECB Loan paid by Messer to Citi Bank. The Company is of the view that contentions of Messer has no merits. "

49. The Minutes of the Meetings dated 27.05.2002 and 31.01.2003

reveal that the Balance Sheets and accounts were adopted unanimously,

with the participation and signatures of the nominee Director of the

appellant. In the Minutes of Meeting dated 27.05.2002, it has been noted

as under:-

"1. ADOPTION OF THE AUDITED BALANCE SHEET AS AT 31ST DEC. 2001 AND PROFIT & LOSS ACCOUNT FOR THE ENDED ON THAT DATE AND THE REPORTS OF THE DIRECTORS AND AUDITORS THEREON The Chairman stated that the Audited Balance Sheet of the Company as at 31st December,2001 and Profit & Loss Account

Page 36 of 61 for the year ended on that date together with schedules, annexures and attachments having already been circulated and lying with the Members for quite some time. The Chairman read the Auditor's Report. However, annexure to the Auditor’s Report was taken as read with the permission of the Members present. After discussions on the Accounts the following Resolution was proposed as an ordinary Resolution by Mr. S. C. Goyal and seconded by Mr. Winfrid Schmidt.

RESOLVED THAT Audited Balance Sheet as at 31 December, 2001 and Profit &Loss Account for the year ended on that date and the Reports of the Directors and Auditors thereon as laid before the Members of this Meeting be and are hereby adopted."

The Chairman put the resolution on vote by show of hands, which was carried unanimously.”

50. Similarly, Minutes of Meeting dated 31.01.2003 recorded as under:

'' (iii) RESOLVED FURTHER that the Draft Balance Sheet as at 31st December, 2002 and profit & loss account of the Company together with accounting policies, schedules and notes thereon, for the year ended 31st December, 2002 together with relevant attachments having placed before the Board, be and are hereby approved and the same be authenticated in terms of section 215 of the Companies Act, 1956 by at least two Directors, one of whom shall be Managing Director along with Company Secretary of the Company and the same may be submitted to the Statutory Auditors of the Company for their Reports thereon. Thereafter, Balance Sheet as at 31.12.2002 and Profit& Loss Account for the year ending 31.12.2002 were signed by Mr. S.C. Goyal, Managing Director, Mr Winfrid Schmidt and Mr. G.K. Balaya, Directors of the company along with Mr. N.K. Bagri, Company Secretary of the company and then these were forwarded to the Statutory Auditors of the company for their report thereon, who were present in the office ...”

51. Although the English Court had referred to the Balance Sheet and

the Minutes of Meetings, certain other correspondence, including the

respondent’s e-mail dated 20.02.2003 disputing the appellant’s

Page 37 of 61 subsequent objections raised vide communication dated 19.02.2003,

does not appear to have formed part of the record of summary

adjudication. The Division Bench of the High Court has taken note of the

said e-mail dated 20.02.2003 and arrived at the conclusion that reliance

on such evidence could have made a material difference to the outcome.

The attempt on the part of the appellant to dispute the entries in the

Balance Sheet, after having participated in and assented to their adoption,

could not have been readily accepted in summary adjudication,

particularly when statutory presumptions and material communications

had not undergone the required test of proof in a full-fledged trial.

52. In our considered view, triable issues were disclosed. The

respondent sought leave to defend, adduced contemporaneous

documents in support of its defence. It was incumbent upon the English

Court to refrain from disposing of the case by way of summary judgment.

The grant of summary judgment resulted in premature adjudication of

disputed questions of fact and effectively denied the respondent a

meaningful opportunity to establish its case through oral evidence and

cross-examination.

53. Having considered the matter in detail, we are of the opinion that the

procedure adopted in rendering of the foreign judgment sought to be

enforced is not consistent with the well-established principles of law.

Page 38 of 61 Consequently, the summary disposal of the claim in the presence of triable

issues cannot be sustained, and we are constrained to hold that the

foreign judgment, falls foul of the requirement of Section 13(b) CPC.

Re: Issue II. Whether the judgment is unenforceable in view of the conditions imposed by RBI in exercise of the statutory power under FERA:

54. In view of our decision on the first issue, it is not necessary for us to

delve into the present issue relating to bar of enforceability of the foreign

decree in view of the RBI communication dated 03.09.1997. However, as

substantial arguments were advanced on this issue, we will proceed to

give our opinion even on this issue.

55. There is no dispute about the fact that the mandatory requirement

of obtaining the prior permission of Government of India as well as that of

the RBI was secured by the parties before availing external borrowing.

However, the question relates to the consequence of the conditions

imposed by RBI while granting permission by its letter dated 03.09.1997.

In other words, whether the condition that “In case of invocation of

guarantee no liability whatsoever will extend to the Indian company” would

operate as an absolute bar to enforcement for all times to come as

contended by Mr. Chidambaram.

Page 39 of 61

56. In light of the competing submissions, the question that arises for

consideration is twofold: first, the true import and legal effect of the RBI

condition dated 03.09.1997 within the framework of the then prevailing

foreign exchange law; and second, whether enforcement of the foreign

decree, in disregard of such condition, would attract the bar contained in

Sections 13(c) and 13(f) of the CPC or is enabled under Section 47 of the

FERA Act, 1973.

57. The purpose and object of the FERA Act, 1973 is explained in LIC

of India v. Escorts Ltd.34. The position as it existed when the conditional

permission was granted, when the Act was in operation can well be

appreciated in the following background;

“4. The present state of Indian economy which has to operate under the existing world economic system is such that India needs foreign exchange and, lots of it, to meet the demands of its developmental activities. It has become necessary to earn, conserve and build up a reservoir of foreign exchange. So the Parliament and the executive Government have been taking steps, from time to time, to regulate, to conserve and improve the foreign exchange resources of the country and the proper utilisation thereof in the interests of the economic development of the country. The Foreign Exchange Regulation Act, 1973 was enacted for that purpose.

63….. The object of the Foreign Exchange Regulation Act, as already explained by us, undoubtedly, is to earn, conserve, regulate and store foreign exchange. The entire scheme and design of the Act is directed towards that end. Originally the Foreign Exchange Regulation Act, 1947 was enacted as a temporary measure, but it was placed permanently on the Statute Book by the Amendment Act of 1957. The Statement of

34 (1986) 1 SCC 264.

Page 40 of 61 Objects and Reasons of the 1957 Amendment Act expressly stated, “India still continues to be short of foreign exchange and it is necessary to ensure that our foreign exchange resources are conserved in the national interest”. In 1973, the old Act was repealed and replaced by the Foreign Exchange Regulation Act, 1973, the long title of which reads: “An Act to consolidate and amend the law regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency and bullion, for the conservation of foreign exchange resources of the country and the proper utilisation thereof in the interest of the economic development of the country.” We have already referred to Section 76 which emphasises that every permission or licence granted by the Central Government or the Reserve Bank of India should be animated by a desire to conserve the foreign exchange resources of the country. The Foreign Exchange Regulation Act is, therefore, clearly a statute enacted in the national economic interest….”

58. It is in this context that we must exercise certain provisions of FERA.

“Section 8 - Restrictions on dealing in foreign exchange

(1) Except with the previous general or special permission of the Reserve Bank, no person other than an authorised dealer shall in India, and no person resident in India other than an authorised dealer shall outside India, purchase or otherwise acquire or borrow from, or sell, or otherwise transfer or lend to or exchange with, any person not being an authorised dealer, any foreign exchange: Provided that nothing in this sub-section shall apply to any purchase or sale of foreign currency effected in India between any person and a money- changer.

Explanation- For the purposes of this sub-section, a person, who deposits foreign exchange with another person or opens an account in foreign exchange with another person, shall be deemed to lend foreign exchange to such other person.

(2) Except with the previous general or special permission of the Reserve Bank, no person, whether an authorised dealer or a money-changer or otherwise, shall enter into any transaction which provides for the conversion of Indian currency into foreign currency or foreign currency into Indian currency at rates of exchange other than the rates for the time being authorised by the Reserve Bank.

Page 41 of 61 (3) Where any foreign exchange is acquired by any person, other than an authorised dealer or a money-changer, for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or the conditions cannot be complied with the said person shall, within a period of thirty days from the date on which he comes to know that such foreign exchange cannot be so used or the conditions cannot be complied with, sell the foreign exchange to an authorised dealer or to a money- changer.

(4) For the avoidance of doubt, it is hereby declared that where a person acquires foreign exchange for sending or bringing into India any goods but sends or brings no such goods or does not send or bring goods of a value representing the foreign exchange acquired, within a reasonable time or sends or brings any goods of a kind, quality or quantity different from that specified by him at the time of acquisition of the foreign exchange, such person shall, unless the contrary is proved, be presumed not to have been able to use the foreign exchange for the purpose for which he acquired it or, as the case may be, to have used the foreign exchange so acquired otherwise than for the purposes for which it was acquired.

(5) Nothing in this section shall be deemed to prevent a person from buying from any post office, in accordance with any law or rules made thereunder for the time being in force, any foreign exchange in the form of postal orders or money orders.”

59. Section 8 restricts dealings in foreign exchange and mandates that,

except with the previous general or special permission of the RBI no

person other than an authorised dealer shall purchase, acquire, borrow,

sell, transfer, lend or exchange foreign exchange with any person who is

not an authorised dealer. The section thus establishes a controlled regime

Page 42 of 61 whereby acquisition, use, and disposal of foreign exchange remain

subject to regulatory supervision and purpose-specific compliance.

60. In view of the existing legal regime and also in compliance of Clause

14.1 of the Loan Agreement, an application dated 26.12.1996 was

presented to Joint Secretary (ECB), Department of Economic Affairs

seeking approval of the ECB. The said application is reproduced herein

for ready reference:

“…The CITIBANK International Plc, London, has in principle agreed to grant the foreign currency loan of USD 3 Million for financing the Working capital requirements. The sanction letter for the loan is enclosed.

We are also enclosing herewith application for seeking approval for External Commercial Borrowing of USD 3 million for Rupee Expenditure/ Working Capital, and request you to grant the approval at the earliest.

You are also requested to grant exemption from the application of Withholding Tax on all interest payments, agency and arrangement fee and reimbursement of out of pocket expenses under Section 10 (15) (iv) (f) of the Income Tax Act, 1961. Thanking you, Yours faithfully, For GOYAL MG GASES LIMITED” (emphasis supplied)

61. Said application was accorded approval by Department of

Economic Affairs vide communication dated 02.04.1997. The relevant

portion of said communication is as follows:

“Dear Sirs,

With reference to your letter no. GMG/FIN/6.21, dated 26-12- 1996, on the subject cited above, I am directed to convey the approval of the Government of India, Ministry of Finance,

Page 43 of 61 Department of Economic Affairs, for your obtaining a foreign currency loan from M/s. Citibank International Plc, London, for financing the import of capital goods, on the following terms and conditions: -

……..

2. No other charges in foreign currency or Indian Rupee other than those specifically authorized in terms of this sanction will be permitted for payment.

4. You are requested to obtain the approval of the Reserve Bank of India, Exchange Control Department, through your banker under FERA, 1973 in order to satisfy the Reserve Bank that the terms of the Government approval are complied with and that no additional foreign exchange liability, either express or implied, is being assumed under the arrangements.

7. The Reserve Bank of India, would be advised to allow you to draw the loan and effect the advance payment/down payment only after your agreement with the lender is taken on record by this Department. You are, therefore, requested to make available to this Department one executed copy of the loan agreement, immediately after it is entered into, along with the enclosed proforma duly filled (in duplicate), with reference to this sanction letter. Please note that if the said executed copy of the agreement along with proforma is not made available to this Department within three months from the date of issue of this letter, the approval for External Commercial Borrowings contained herein shall automatically lapse unless specifically extended by this Department.” (emphasis supplied)

62. Thereafter, respondent applied to RBI vide application dated

24.04.1997 seeking its approval for the purpose of availing loan. RBI

granted ‘in-principle’ approval to respondent on 28.05.1997 and stated

that respondent shall approach RBI for final approval after the loan

agreement is taken on record by the Government of India.

Page 44 of 61 63. Accordingly, Government of India took the loan agreement on

record on 24.07.1997 and noted that;

“Dear Sirs,

With reference to your letter no. GMG/FIN/6.21, dated 30-06- 1997, on the subject cited above, I am directed to convey the approval of the Government of India, Ministry of Finance, Department of Economic Affairs, to include item no. (h) and (i) under para (1) of this Department's sanction letter of even no. dated 01-04-1997 (Sanction No. 765/23), as under: -

(h) Commitment fee: 0.2% p.a. on the undrawn portion of the loan, payable in arrears.

(i) Transfer fee: USD 750/-

2. With reference to para 6 of the above mentioned letter, you. have furnished to this Department an executed copy of the loan agreement for an amount of USD 7 Million which has been taken on record by this Department. While the terms and conditions of our above sanction letter appear to have been correctly incorporated in the loan agreement, any provisions of the loan agreement, which are found to be at variance with the provisions of the said sanction letter shall be void and be not binding on the Government of India or Reserve Bank of India.” (emphasis supplied)

64. Pursuant to the same, RBI granted final approval to the loan on

12.08.1997 appending various regulatory conditions upon approval of the

loan facility. Relevant portion of RBI’s final approval, as is necessary for

our purposes, is reproduced below:

“Dear Sir,

Midterm/Longterm Foreign Exchange Loan/Credit Final Approval-Regn No. 40958

Page 45 of 61 Kindly refer to your application dated 30.07.97 made in Form 83.

2. We are giving herebelow our Final approval for raising Foreign Currency Loan/Credit of US$ 7 Million from Mis Citibank. Intl.

Plc, London subject to the following terms and conditions. …..

7. As regard issue of guarantee we shall be advising you separately in due course.” (emphasis supplied)

65. RBI, however, left the issue of guarantee open by stating that, “as

regards issue of guarantee we shall be advising you separately in due

course.” Subsequently, on 20.08.1997, respondent wrote a letter to RBI

informing that the lender bank is not allowing to withdraw the loan because

the issue of guarantee has not been decided and therefore requested for

grant of clearance.

66. Accordingly, RBI on 03.09.1997 accorded permission for issuance

of guarantee by appellant for securing the loan subject to two conditions:

“ i) There is no outgo of foreign exchange by way of any fee, direct or indirect, for the proposed guarantee.

ii) In case of invocation of guarantee, no liability whatsoever will extend to the Indian Company.”

(emphasis supplied)

67. Thus, the ultimate analysis falls on the interpretation and

consequence of said condition. However, before we delve into the true

import of the RBI condition, we must first refer to how the same have been

dealt and considered by Courts below.

Page 46 of 61

68. Findings of the English Court on RBI communication dated

03.09.1997: Having examined the statutory framework within which letter

dated 03.09.1997 has been issued, it is necessary to appreciate the

judgment rendered by the English Court. While passing the summary

judgment dated 07.02.2006, English Court had specifically considered the

respondent’s reliance on the RBI communication dated 03.09.1997. It was

observed that;

“19. The RBI was provided with a copy of the loan agreement. The conditions were, on the evidence of Indian law adduced on behalf of Messer., standard provisions intended to ensure that if the guarantor paid the lender, the borrower would have no liability to the lender. That would make sense. It is difficult to see why the RBI, having permitted Goyal to use foreign exchange to meet its liabilities under the loan agreement, should be concerned that the same liabilities were owed to Messer, provided they ceased to be owed to Citibank. In any event, the incidence of Indian foreign exchange law would, as Mr Foxton submitted, only invalidate a contractual obligation if Indian was the proper law of the contract or the law of the place for its performance. Neither apply.”

69. Findings of the Single Judge: Before the Single Judge, when

respondent agitated its objections with regard to RBI conditions, the same

were dispelled by observing as under;

“44. As regards the requirement of prior permission under the FERA, it must be noticed that FERA is no longer in existence and has been substituted by the Foreign Exchange Management Act, 1999 (‘FEMA’). The current circular of the RBI which is relevant is Circular No. 12/2013-14 dated 1st July 2013. The relevant portion of the Circular reads as under:

Page 47 of 61

“The Reserve Bank vide its Notification No. FEMA.29/RB2000 dated September 26, 2000 has granted general permission to a resident, being a principal debtor to make payment to a person resident outside India, who has met the liability under a guarantee. Accordingly, in cases where the liability is met by the non-resident out of funds remitted to India or by debit to his FCNR(B)/NRE account, the repayment may be made by credit to the FCNR(B)/NRE/NRO account of the guarantor provided, the amount remitted/credited shall not exceed the rupee equivalent of the amount paid by the non-resident guarantor against the invoked guarantee.”

45. In any event, as explained in Renusagar even an ex post facto permission of the RBI could be obtained by the DH if it seeks to repatriate the funds deposited by the JD in the execution proceedings. It would be for the DH to comply with all the requirements of the RBI at that stage. Consequently, this objection is without merit.

50. As regards the objection that the High Court at England ignored the provisions of FERA, the DH is right in pointing out that the permission could be obtained even at a subsequent stage. Under a Master Circular dated 1st July 2013, the RBI has granted general permission to a principal debtor to make a payment to a person residing outside India, who has made the liability under guarantee. It has been held in Silver Shield Construction Co. Ltd. v. Recondo Ltd. 1994 (15 )CLA 92 (Bom) and Dhanraj Mal Gobindram v. M/s. Shamji Kalidas and Co.

1961 (3) SCR 1020 that the permission of RBI under Section 47(3) (b) of FERA need not be obtained prior to filing of the execution petition.”

70. Findings of the Division Bench: The Division Bench however took

a contrary view and observed that;

“52……. We note that in the impugned judgment and decree passed by the English Court, it has been observed that the condition imposed by the RBI that ‘if the guarantor paid to the lender, the borrower would have no liability to the lender’, makes sense. However, it further questioned as to why RBI had granted permission to appellant/JD to use foreign exchange to meet its liabilities under the loan agreement and recorded that the incidence of Foreign Exchange Law would invalidate the

Page 48 of 61 contractual obligation as a submission of learned counsel - Mr. Foxton, who represented respondent/DH. On this aspect we find that while observing so, the UK Court did not consider Clause - 14.1 of the loan agreement, which reads as under:-

“Maintenance of Legal Validity: Each of the Obligors shall obtain, comply with the terms of and do all that is necessary to maintain in full force and effect ail authorizations, approvals, licences and consents required in or by the laws and regulations of its jurisdiction of incorporation to enable it lawfully to enter into and perform its obligations under this agreement, and to ensure the legally, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of this Agreement.”

53. The above apparently shows the respondent/DH was bounden to take permission from RBI for implementation of the Loan Agreement and the RBI, while granting the permission, had put the twin conditions.

54. ……….On this aspect we find that the present case does not come within the ambit of Section 47(3)(b) of FERA. These provisions are applicable in cases where permission is required to be obtained for the first time from RBI after final decree is passed so that foreign currency can be sent abroad. The learned Single Judge on this issue has relied upon Supreme Court’s decision in Renusagar Power Co. Ltd. Vs. General Electric Co.

1994 Supp (1) SCC 644 to hold that ex post facto permission from RBI could be obtained by the DH for repatriating the funds deposited by the appellant/JD. Upon going through decision in Renusagar Power Co. Ltd. Vs. General Electric Co. and applying it to the facts of the present case, we find that no doubt in view of said decision ex post facto permission can be obtained from the RBI to remit the funds, however, when the decree itself is found to be vitiated, being against the prescribed procedure of law recognized in India, the occasion for obtaining ex post facto permission from RBI by the decree holder in respect of awarded amount, does not arise at all. We have already observed that the decree passed by the Court in UK is without any merit and abrogative. Also, in the present case the respondent/DH was the Guarantor to the lender located in a foreign country. We also find that once a conditional permission has been granted by the RBI, any claim beyond the said conditions is contrary to law.”

(emphasis supplied) Page 49 of 61

71. True import of Section 47, FERA and RBI conditions dated

03.09.1997: Matters relating to performance of contracts, relating to

external commercial borrowings in the context of the Act is laid down in Section 47 of FERA. As resolution of this issue turns on the true and

correct interpretation of Section 47, the same is reproduced herein for

ready reference;

“47. Contracts in evasion of the Act .-(1) No person shall enter into any contract or agreement which would directly or indirectly evade or avoid in any way the operation of any provision of this Act or of any rule, direction or order made thereunder.

(2) Any provision of, or having effect under, this Act that a thing shall not be done without the permission of the Central Government or the Reserve Bank, shall not render invalid any agreement by any person to do that thing, if it is a term of the agreement that, that thing shall not be done unless permission is granted by the Central Government or the Reserve Bank, as the case may be; and it shall be an implied term of every contract governed by the law of any part of India that anything agreed to be done by any term of that contract which is prohibited to be done by or under any of the provisions of this Act except with the permission of the Central Government or the Reserve Bank, shall not be done unless such permission is granted.

(3) Neither the provisions of this Act nor any term (whether express or implied) contained in any contract that anything for which the permission of the Central Government or the Reserve Bank is required by the said provisions shall not be done without that permission, shall prevent legal proceedings being brought in India to recover any sum which, apart from the said provisions and any such term, would be due, whether as debt, damages or otherwise, but-

(a) the said provisions shall apply to sums required to be paid by any judgment or order of any Court as they apply in relation to other sums;

(b) no steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said Page 50 of 61 provisions apply except as respects so much thereof as the Central Government or the Reserve Bank, as the case may be, may permit to be paid; and

(c) for the purpose of considering whether or not to grant such permission, the Central Government or the Reserve Bank, as the case may be, may require the person entitled to the benefit of the judgment or order and the debtor under the judgment or order, to produce such documents and to give such information as may be specified in the requisition.

(4) Notwithstanding anything contained in the Negotiable Instruments Act, 1881, neither the provisions of this Act or of any rule, direction or order made thereunder, nor any condition, whether expressed or to be implied having regard to those provisions, that any payment shall not be made without permission under this Act, shall be deemed to prevent any instrument being a bill of exchange or promissory note.”

(emphasis supplied)

72. Sub-section (3) of Section 47 clarified that neither the provisions of

FERA nor contractual stipulations requiring prior permission of the Central

Government or the Reserve Bank shall prevent legal proceedings from

being instituted in India to recover sums otherwise due. However, the

latter part of the provision engrafts an express limitation in mandatory

terms, stipulating that “no steps shall be taken for the purpose of enforcing

any judgment or order… except… as the Reserve Bank… may permit.”

73. The statutory distinction between the institution of proceedings and

the enforcement of a judgment assumes considerable significance. While

the legislation expressly permitted adjudicatory proceedings to determine

liability, it has simultaneously restricted execution of such a determination

in the absence of regulatory approval. The use of the expression “no steps Page 51 of 61 shall be taken” manifests an intention to impose a condition precedent to

enforcement. The scheme of the provision thus makes the legislative

position clear that there is a conscious distinction between the initiation of

proceedings and the stage of enforceability. The underlying purpose is to

ensure that access to a judicial remedy is not foreclosed and that liability

may be determined by a competent court, while at the same time

preserving the authority of the Central Government and the RBI to decide

whether, and to what extent, such adjudicated liability may ultimately be

enforced. The power to grant or refuse permission, therefore, continues

to vest in the regulatory authorities, and the enforceability of any decree

remains subject to the grant of such permission.

74. The stage at which the RBI permission is required: The real

controversy, therefore, narrows down to the stage at which permission of

the RBI is required, if at all, for the purpose of enforcement of the foreign

decree. In other words, whether it must be before initiation of the

enforcement proceedings or even thereafter.

75. Mr. Chidambaram strongly relied on the decision of this Court in

Asha John Divianathan v. Vikram Malhotra & Ors.35 to contend that

Section 8 specifically uses the expression “prior permission” and that must

35 (2021) 19 SCC 629.

Page 52 of 61 operate as a clear bar. He would contend that under similar circumstances

this Court has held that transfer of property without permission under

Section 31 is prohibited under law. On careful scrutiny, we notice that the

transaction in Asha John (supra) was without any prior permission

whatsoever, and therefore the Court was compelled to conclude that the

transaction is prohibited. In so far as the present case is concerned, a

prior permission was sought and RBI has granted the prior permission. Under these circumstances, we are of the opinion that principles laid down

in Asha John (supra) have no application in facts and circumstances of

the present case.

76. In Renusagar Power Co. Ltd. v. General Electric Co. 36 the Court

had to deal with a situation where the permission was in fact refused by

the Central Government. This Court considered the matter and directed

as under:

“84. Shri Venugopal has urged that Section 47(3) cannot be applied in the present case because it postulates a situation where permission of the Central Government has not been sought and that in the present case permission was sought but was refused earlier. In our view the earlier refusal by the Government to give its approval to the rescheduling of payment of instalments does not in any way preclude the Government of India from considering the matter in the light of the subsequent developments and it cannot be said that merely because the Government of India had refused to give its approval to rescheduling of payment of instalments it would not grant permission under Section 47(3) of FERA to the enforcement of

36 1994 Supp (1) SCC 644.

Page 53 of 61 the judgment that may be passed in these proceedings. It has also been urged that Section 47(3) of FERA is applicable where the legal proceedings are brought in India to recover a sum which is ‘due’, i.e., as liquidated sum presently owing and the said provision would not apply to an obligation to pay on a future date. We do not find any support for this submission from the language of Section 47(3) of FERA wherein the words used are “to recover any sum which, apart from the said provisions and any such term, would be due, whether as debt, damages or otherwise”. The words “would be” which precede the word “due” indicate that the quantum of the amount has to be fixed in the legal proceedings and that it need not be a predetermined amount. Moreover in the present case, we are concerned with the proceedings for the enforcement of the award wherein the amount due has already been determined by the Arbitral Tribunal. We are, therefore, unable to hold that the enforcement of the award would involve violation of any of the provisions of FERA and for that reason it would be contrary to public policy of India so as to render the award unenforceable in view of Section 7(1)(b)(ii) of the Act.”

77. The reliance placed on the decisions in LIC of India (supra) and

Renusagar (supra) does not materially advance the contention urged,

having regard to the distinct statutory setting and the stage at which the

present controversy arises. In LIC of India (supra), the Constitution Bench

was concerned with the interpretation of Section 29(1) of FERA, where

the expression used was merely “permission” without the qualifying word

“previous”, and the issue was whether such permission could be granted

ex post facto for validating a transaction. The ratio of that decision turned

on the textual distinction between provisions expressly requiring “previous

permission” and those employing the word “permission” simpliciter. The

present case, however, arises in the context of Section 47(3)(b), which

operates at a materially different stage, namely, the enforcement of a

Page 54 of 61 judgment, and which, in express and prohibitory terms, mandates that “no

steps shall be taken for the purpose of enforcing any judgment or order…

except as the Reserve Bank… may permit.” The language employed is

negative thereby creating a statutory embargo on enforcement in the

absence of permission.

78. Likewise, in Renusagar (supra) the Court was concerned with the

permissibility of enforcing a foreign arbitral award and whether the earlier

refusal of governmental approval would foreclose consideration of

permission at a subsequent stage. The decision proceeded on the footing

that the competent authority retained the discretion to consider the grant

of permission in light of subsequent developments and did not lay down

that enforcement could proceed in the absence of permission as

contemplated under Section 47(3)(b). On the contrary, the reasoning in

Renusagar (supra) implicitly affirms the necessity of such permission at

the stage of enforcement, while clarifying that refusal at an earlier point

does not render the statutory power to grant permission otiose. The

decision, therefore, cannot be read as dispensing with the statutory

requirement of prior permission before enforcement, nor as supporting the

contention that execution may proceed independent of regulatory

sanction.

Page 55 of 61

79. On the other hand, Bombay High Court had to deal with situation

similar to facts of the present case, though the issue arose under Section

26(6). The High Court, in Algemene Bank Nederland NV v. Satish Dayalal

Choksi37 took the view that;

“32…..Under section 47(3), therefore, a suit for the enforcement of a guarantee for which permission of the Reserve Bank/Central Government would have been required under Section 26(6) can be brought in India. Filing of a suit, therefore, on such a guarantee cannot be said to be contrary to any law in India because S. 47 sub-sec. (3) expressly permits such legal proceedings in India. Such proceedings abroad cannot be said to be violative of any law in India. However, no steps can be taken for the purpose of enforcing any judgment or order for the payment of any sum under such a guarantee except in respect of so much thereof as the Central Government or the Reserve Bank may permit to be paid. With the result that before a foreign decree passed on such a guarantee can be executed in India, permission of the Reserve Bank or the Central Government for realising such sum is necessary.

33. Section 47(3)(b) says, “No steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as the Central Government or the Reserve Bank may permit to be paid”. An application under Order 21 Rule 22 is certainly a step for the purpose of enforcing a judgment. Under Order 21 Rule 11 every application for execution of a decree shall be in writing signed and verified by the applicant and shall contain, inter alia, various particulars including the mode in which the assistance of the court is required. Under order 21 Rule 22, inter alia, where an application for execution of a foreign decree is filed under the provisions of sec. 44A, leave is necessary. Therefore, before any leave can be obtained under Order 21 Rule 22, it is necessary to make an application under O. 21 R.

11. These are, therefore, clearly proceedings for the purpose of enforcing a foreign judgment. Before such steps can be taken permission of the Reserve Bank or the Central Government, as the case may be, is necessary under section 47(3)(b).

37 1989 SCC OnLine Bom 282.

Page 56 of 61

34. It was contended by Mr. Tulzapurkar, learned Counsel for the plaintiff-Bank, that such permission can be obtained after leave is granted under Order 21 Rule 22 but before the actual execution is levied. This contention cannot be accepted in view of the express provisions of section 47(3)(b). Section 47(3)(b) clearly prohibits any step being taken for the purpose of enforcement without the permission of the Reserve Bank or the Central Government. It does not say that actual execution shall not be levied without such permission. In fact, once leave is granted under O. 21 R. 22, nothing further is required to be done and the plaintiff Bank can proceed with execution. A prior permission of the Reserve Bank or the Central Government, as the case may be, is therefore required before taking any step for the enforcement of the decree, including an application under O. 21 R. 22. Such permission has not been obtained by the plaintiff- Bank. Without such permission it cannot proceed.”

80. The view taken by the Bombay High Court in Algemene Bank

(supra) is more directly referable to the question arising in the present

case, as it construed Section 47(3)(b) in the context of execution

proceedings relating to a foreign decree. The High Court held that the

expression “no steps shall be taken for the purpose of enforcing any

judgment” is wide enough to include applications under Order XXI of CPC.

On that basis, it was held that permission of RBI or the Central

Government must be obtained before initiating such steps in execution.

This construction emphasises the mandatory nature of the restriction

operating at the stage of execution, while at the same time recognising

the distinction drawn by the statute between the institution of proceedings

on the one hand and the taking of steps in enforcement on the other. The

decision in Algemene Bank (supra), therefore, lends support to the view

that although adjudication of liability is not interdicted, the execution

Page 57 of 61 process itself cannot be set in motion in the absence of the requisite

regulatory permission.

81. Having considered the matter in detail, we are of the opinion that

there is no prohibition for initiation of proceedings and for a determination

as regards the liability. However, after obtaining a declaration, for its

implementation, obtaining permission from RBI is sine qua non. In other

words, without RBI approval, it is not possible to take steps for

enforcement of a decree.

82. The elasticity of obtaining ex-post facto permission as suggested in

LIC of India and Renusagar (supra) will have practical problem. While

these judgments do not overrule the necessity to obtain permission of RBI

as a mandatory requirement, they have suggested a way out by

provisioning ex-post facto permission. There is a practical problem in this

approach in the sense that if the Indian court affirms executability of the

foreign decree and thereafter the Central Government or the RBI refuses

to grant permission, the whole exercise would be redundant. On the other

hand, if the parties are required to take RBI permission first and then

approach the court for execution, two consequences would follow; (i) If

RBI refuses permission, matter ends there - further enforcement would

not arise. Maybe the party could challenge the legality and validity of the

order refusing permission in writ proceedings, that’s a different matter and Page 58 of 61

(ii) On the other hand, if permission is granted, the party will approach the

court for execution then in which case, the only question remaining for

court to consider is compliance of Section 13 CPC coupled with Section

47(3)(b), FERA.

83. In view of the above discussion, we have no hesitation in rejecting

Mr. Chidambaram’s submission that there is absolute and total bar of

enforcement of a decree by virtue of the conditional permission in its letter

dated 03.09.1997. This submission is therefore rejected. In the normal

course, a party obtaining foreign judgment can seek enforcement in India

if such a judgment qualifies the test laid down in Section 13 of CPC. The

Central Government/RBI can exercise its regulatory power under Section

47(3) of FERA and grant its approval before any further steps are taken

for implementing the judgment.

84. Returning to the facts of the present case, in view of our finding on

issue no. 1, that the foreign judgment is violative of requirements of

Section 13 CPC, our findings on issue no. 2 will have no consequence.

We have decided issue no. 2 in view of the fact that detailed submissions

were made by both the parties. We also considered it necessary to clarify

the position in view of the text of Section 47 of FERA coupled with its

interpretation by Bombay High Court.

Page 59 of 61

85. At this juncture, it would also be apposite to clarify that the

objections raised by the respondent do not extend to all the grounds

enumerated under Section 13 of CPC. Upon careful consideration, we find

that the English Court possessed jurisdiction over the parties and the

subject matter. The Loan Agreement executed between the parties

expressly provided that the contract would be governed by English law

and that disputes arising therefrom would be subject to the jurisdiction of

the English Courts. A reading of clause 12.5, 31.1 and 31.2 leads to

inescapable conclusion that English Court was a competent court.

Likewise, no case of fraud within the meaning of Section 13(e) CPC has

been made out. To that extent, the judgment of the English Court cannot

be faulted under clauses (a), and (e) of Section 13 CPC.

86. However, for the reasons already recorded, we are of the

considered opinion that the foreign judgment suffers from fundamental

infirmities under clauses (b), (c), (d) and (f) of Section 13 CPC. The

adjudication by way of summary judgment in the presence of bona fide

triable issues renders the judgment one not delivered on merits within the

meaning of Section 13(b). Further, the failure of the English Court to give

due effect to statutory permissions and conditions imposed under Indian

foreign exchange law attracts the mischief of Section 13(c). Despite triable

issues, respondent was not granted leave to defend which stands in teeth

Page 60 of 61 of clause (d) of Section 13. The enforcement of liability contrary to binding

statutory conditions also brings the decree within the prohibition contained

in Section 13(f), being opposed to the law in force in India. Accordingly,

while the foreign judgment satisfies certain procedural requirements, it

nonetheless fails the substantive tests mandated under clauses (b), (c),

(d) and (f) of Section 13 CPC.

VIII. Conclusions:

87. For the reasons stated above, which are distinct from those that are

adopted by the Division Bench of High Court, we are of opinion that the

judgment of English Court is not enforceable in terms of Section 44A of

CPC since it falls foul of exceptions enumerated in Section 13 of CPC, as

already noted above.

88. The appeal therefore fails and is dismissed. There shall be no order

as to costs.

………………………………....J. [PAMIDIGHANTAM SRI NARASIMHA]

………………………………....J. [ALOK ARADHE]

NEW DELHI;

APRIL 21, 2026.

Page 61 of 61