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Issues: (i) whether the foreign summary judgment, obtained after setting aside the default judgment and without affording an effective opportunity to defend, was enforceable in India; (ii) whether the RBI conditions attached to the guarantee and the foreign exchange regime barred enforcement of the decree; (iii) whether the balance sheets and board minutes signed by the respondent's nominee supported the appellant's defence that no amount was payable.
Issue (i): whether the foreign summary judgment, obtained after setting aside the default judgment and without affording an effective opportunity to defend, was enforceable in India.
Analysis: The foreign court had set aside the default judgment and proceeded to summary judgment without granting leave to defend, although the defence raised substantial questions. The dispute disclosed triable issues, and denial of an opportunity to defend was held to be contrary to the interest of justice. The procedure adopted abroad was found not to accord with the prescribed safeguards expected in such matters, and the foreign decree was therefore treated as not fit for enforcement on the facts of the case.
Conclusion: The issue was decided in favour of the appellant, and the foreign decree was held unenforceable on this ground.
Issue (ii): whether the RBI conditions attached to the guarantee and the foreign exchange regime barred enforcement of the decree.
Analysis: The RBI had granted permission subject to conditions that no foreign exchange outgo would arise by way of guarantee fee and that, on invocation of the guarantee, no liability would extend to the Indian company. The Court held that the later RBI circular relied upon by the respondent did not displace the earlier conditional permission, and the facts did not justify treating the decree as unaffected by those conditions. The Court also held that ex post facto permission under the foreign exchange law did not arise once the decree itself was found to be legally unsustainable.
Conclusion: The issue was decided in favour of the appellant, and the decree was held contrary to the governing foreign exchange conditions.
Issue (iii): whether the balance sheets and board minutes signed by the respondent's nominee supported the appellant's defence that no amount was payable.
Analysis: The balance sheet entries and board minutes recorded repayment of the ECB loan pursuant to an understanding with the company, and the respondent's nominee had signed and seconded the relevant resolutions. The Court treated these contemporaneous corporate records as significant evidence supporting the appellant's position and noted that the foreign court had not adequately considered the effect of those records and the related statutory presumptions under company law.
Conclusion: The issue was decided in favour of the appellant.
Final Conclusion: The appeal succeeded, the impugned judgment was set aside, and the objections to enforcement stood accepted.
Ratio Decidendi: A foreign decree sought to be executed in India may be refused enforcement where the procedure adopted denies a real opportunity to defend, the decree is inconsistent with governing conditional permissions under Indian regulatory law, and contemporaneous corporate records materially support the defence against liability.
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