Case Note & Summary
The dispute arose from a Share Purchase and Co-operation Agreement (SPCA) executed on 12.05.1995 between (appellant, a foreign company) and (respondent, an Indian company) for a joint venture in industrial gases. Subsequently, the appellant provided a guarantee for a loan of USD 7 million obtained by the respondent from Citibank UK under an External Commercial Borrowing (ECB) facility, approved by the Government of India and RBI subject to conditions. The loan agreement was governed by English law and parties submitted to English court jurisdiction. After the respondent defaulted, the lender invoked the guarantee, and the appellant paid USD 4.78 million on 09.10.2001, seeking reimbursement from the respondent under subrogation rights. The respondent refused payment, leading the appellant to file a suit in the English Court on 17.01.2003. The English Court initially passed a default judgment on 06.02.2003, but upon the appellant's application, set it aside and passed a summary judgment on 07.02.2006 after dismissing the respondent's application for leave to defend. The appellant then sought enforcement of the summary judgment in India. The Single Judge of the Delhi High Court allowed enforcement, but the Division Bench reversed, holding the judgment unenforceable under Section 13 CPC for violating natural justice. The Supreme Court upheld the Division Bench's decision, reasoning that shifting from default to summary jurisdiction and denying leave to defend deprived the respondent of a fair trial. The Court also addressed the FERA issue, clarifying that while there is no bar to initiating proceedings, enforcement requires RBI permission. The appeal was dismissed.
Headnote
A) Civil Procedure - Enforcement of Foreign Judgment - Section 13 CPC - Summary Judgment - The foreign judgment was a summary judgment passed after setting aside a default judgment and dismissing the defendant's application for leave to defend, thereby denying the defendant a fair trial. The Supreme Court held that such a judgment is not conclusive and is unenforceable under Section 13(d) CPC as it violates principles of natural justice. (Paras 2.1, 20-38) B) Foreign Exchange Regulation - Enforcement of Decree - Section 47 FERA - RBI Permission - The Court clarified that under Section 47 of FERA, there is a distinction between initiating legal proceedings and taking steps for enforcement. While there is no bar to adjudicate liability, enforcement of a decree requires prior permission of the Central Government/RBI. This interpretation balances access to justice and regulatory control. (Paras 2.2, 39-60)
Issue of Consideration
Whether a summary judgment passed by a foreign court, after setting aside a default judgment and dismissing the defendant's application for leave to defend, is enforceable in India under Section 13 of the Code of Civil Procedure, 1908, and whether enforcement is barred by conditions imposed by the Reserve Bank of India under the Foreign Exchange Regulation Act, 1973.
Final Decision
The Supreme Court dismissed the civil appeal, upholding the Division Bench's refusal to enforce the foreign judgment. The Court held that the summary judgment was unenforceable under Section 13(d) CPC as it violated principles of natural justice by denying the respondent a fair trial. The Court also clarified the legal position on Section 47 FERA, but did not decide the FERA issue as it was not necessary for the outcome.
Law Points
- Foreign judgment
- Enforcement
- Section 13 CPC
- Summary judgment
- Natural justice
- Leave to defend
- FERA
- RBI permission
- Section 47 FERA
- Access to justice
