Foreign decree enforcement blocked where no adjudication on merits existed and prior foreign exchange permission was absent.

A foreign ex parte decree was held unenforceable where the controversy had not been actually adjudicated on evidence and the judgment merely recorded non-appearance and proof of the claim; it was therefore not a judgment on the merits under section 13(b) of the Code of Civil Procedure. The court also held that proceedings to execute a decree based on a liability governed by the Foreign Exchange Regulation Act required prior permission from the Central Government or the Reserve Bank, and an application for leave to execute was itself a step in enforcement. In the absence of such permission, execution in India was barred.

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Issues: (i) whether the foreign decree was obtained in proceedings opposed to natural justice; (ii) whether the foreign decree was a judgment on the merits within section 13(b) of the Code of Civil Procedure, 1908; (iii) whether leave to execute the decree in India was barred for want of prior permission under the Foreign Exchange Regulation Act, 1973.

Issue (i): whether the foreign decree was obtained in proceedings opposed to natural justice.

Analysis: The defendant had entered appearance in the foreign proceedings, obtained leave to defend, filed a defence, and took steps in the suit. He was given opportunity both by the foreign court and by the domestic courts to defend the action, but he did not avail of those opportunities at the final hearing. The inability pleaded by him to defend the suit was attributable to his own failure to take appropriate steps for obtaining foreign exchange or for challenging the refusal of the Reserve Bank. The procedure followed by the foreign court did not deprive him of a fair opportunity to present his case.

Conclusion: The proceedings were not opposed to natural justice and this objection failed against the defendant.

Issue (ii): whether the foreign decree was a judgment on the merits within section 13(b) of the Code of Civil Procedure, 1908.

Analysis: A judgment is on the merits only when the controversy between the parties is actually examined and adjudicated. Here, although the defendant had filed a defence, the foreign court proceeded ex parte when he failed to appear. The judgment did not show any real investigation of the disputed questions, including the execution and date of the guarantee. It merely recorded failure of appearance and proof of the plaintiff's claim. Such a decree, passed without adjudication of the controversy on evidence, is not a decision on the merits.

Conclusion: The foreign decree was not a judgment on the merits and could not be enforced under section 13(b).

Issue (iii): whether leave to execute the decree in India was barred for want of prior permission under the Foreign Exchange Regulation Act, 1973.

Analysis: The claim was founded on a guarantee allegedly given by a resident in India in favour of a foreign entity, attracting the statutory restriction on enforcement of such liabilities. The Act permitted institution of proceedings, but prohibited steps for enforcing any judgment or order unless the Central Government or the Reserve Bank permitted payment. An application under Order 21, Rule 22 of the Code of Civil Procedure, 1908, was itself a step in enforcement, and no prior permission had been obtained before seeking leave to execute.

Conclusion: In the absence of prior permission, the execution application was not maintainable and leave was refused.

Final Conclusion: The attempt to execute the foreign decree in India failed on both the merits objection under the law governing foreign judgments and the statutory bar arising from foreign exchange control requirements.

Ratio Decidendi: A foreign ex parte decree is not enforceable under section 13(b) when the controversy has not been actually adjudicated on evidence, and where a foreign-exchange-controlled liability is involved, prior governmental or Reserve Bank permission is required before taking any step to enforce the decree in India.

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