2009 (7) TMI 775 - HC - Companies Law

Foreign Court Decree Not Enforceable in India; Recognition Requires Separate Suit

Kitply Industries Ltd. Versus California Pacific Trading Corpn.

The court held that a foreign court's decree was not enforceable in India under section 44A of the CPC as the court issuing the decree was not a 'superior ... What is the legal efficacy of a decree/judgment of a foreign court, such as the one relied upon by the respondent herein, in this country ? Under section 439 of the Companies Act, whether a petition (such as the one herein) is a petition for execution of a decree within the meaning of section 44A of the CPC ? Held that:- A proceeding under section 439 of the Companies Act is not a proceeding for execution of a decree. Consequently, the objections raised by the appellant that in the absence of a notification contemplated under section 44A of the CPC the decree of the American court, which creates the debt in favour of the respondents herein, cannot form the basis of a petition under section 439 of the Companies Act, is rejected. Thus the respondent is seeking the recognition of a debt arising out of a judgment passed by a foreign court but not its enforcement, as understood under the private international law. Whether sections 13 and 14 of the CPC apply to the proceedings under section 439 of the Companies Act are questions which require a separate examination on which the arguments have not been heard yet.In the circumstances we are of the opinion that the appeal shall be listed for further hearing. Issues Involved:1. Legal efficacy of a foreign court's decree/judgment in India.2. Whether a petition under section 439 of the Companies Act is akin to an execution petition under section 44A of the CPC.Issue-wise Detailed Analysis:1. Legal Efficacy of a Foreign Court's Decree/Judgment in India:The court examined the principles governing the recognition and enforcement of foreign judgments in India. It was noted that the Code of Civil Procedure (CPC), 1908, regulates the adjudicatory process of civil disputes in India. Section 44A of the CPC specifically deals with the execution of decrees passed by 'superior courts' of 'reciprocating territories.' However, the court from which the respondent obtained the decree is neither a 'superior court' nor is the United States a 'reciprocating territory' within the meaning of section 44A of the CPC.The court discussed the principles of private international law, emphasizing that a foreign judgment has no direct operation in India and cannot be immediately enforced by execution. Instead, a foreign judgment may be recognized or enforced through a suit upon the judgment, as established by the Supreme Court in Roshanlal Kuthalia v. R.B. Mohan Singh Oberoi. The court also highlighted the limitations on the recognition of foreign judgments under section 13 of the CPC, which lists conditions under which a foreign judgment may not be recognized.2. Whether a Petition under Section 439 of the Companies Act is Akin to an Execution Petition under Section 44A of the CPC:The court examined whether a petition under section 439 of the Companies Act, seeking the winding up of a company on the ground of inability to pay debts, is in the nature of an execution petition. It was argued that such a petition is not an execution petition within the meaning of section 44A of the CPC. The court noted that section 433 of the Companies Act authorizes the court to wind up a company under specified contingencies, including the company's inability to pay its debts. Section 434 creates a fiction that a company is deemed unable to pay its debts under certain circumstances.The court observed that the right to file a winding-up petition is not exclusive to creditors but can also be exercised by other entities such as the company itself, the Registrar of Companies, or any contributory of the company. The discretionary nature of the court's power under section 439 further distinguishes it from the execution of a decree, where the executing court lacks such discretion.The court concluded that a proceeding under section 439 of the Companies Act is not a proceeding for the execution of a decree. Consequently, the objections raised by the appellant regarding the absence of a notification under section 44A of the CPC were rejected. The respondent was seeking recognition of a debt arising from a foreign judgment, not its enforcement.Further Considerations:The court acknowledged that the recognition of a debt arising from a foreign judgment by a company court involves principles of law that require separate examination. Arguments on whether sections 13 and 14 of the CPC apply to proceedings under section 439 of the Companies Act have not been heard yet.Conclusion:The appeal was listed for further hearing to address the remaining questions regarding the recognition of foreign judgments and the applicability of sections 13 and 14 of the CPC to proceedings under section 439 of the Companies Act.