TMI Blog2014 (3) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of Section 433 and Section 434 of the Companies Act, 1956. - petition dismissed - Decided against the petitioner. - Company Petition No. 69 of 2013 - - - Dated:- 5-3-2014 - G. S. Patel,JJ. For the Petitioner : Mr. Rajiv Narula, with Mr. Aurup Dasgupta, i/b M/s Jhangiani, Narula Associates For the Respondent : Mr. Vishal Sheth i/b Mr. Ashwin Shankar JUDGMENT (Per G. S. Patel, J.) 1. Is an ex-parte default summary judgment obtained in a nonreciprocating foreign country against an Indian company a debt due and payable by it within the meaning of Section 433(e) of the Companies Act, 1956? This is the issue in this winding up petition. 2. The petitioner, Marine Geotechnics LLC ( Marine Geotechnics ) is an American company. It has its headquarters in Houston, Texas. It brought suit against the respondent-Company, Coastal Marine Construction Engineering Ltd. ( Coastal Marine ) in the United State District Court, Southern District of Texas, Houston Division. Marine Geotechnics filed a Motion for Entry of Default Judgment against Coastal Marine and three others. On 18 January 2011, the US District Court granted Marine Geotechnics motion and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sheth submits, the judgment of the US District Court is not a debt within the meaning of Section 433(e) of the Companies Act, 1956 sufficient to provide a foundation for a winding up action. 7. Mr. Narula relies, first, on the decision of a single Judge of this Court in China Shipping Development Co. Ltd. vs Lanyard Foods Ltd. [2008] 142 Comp Cas 647 (Bom); 2007 (5) Bom CR 684 There, in a case of affreightment, four letters of indemnity were said to have been issued by the respondent-company jointly and severally with the State Bank of Saurashtra. The petitioner having delivered the cargo at the respondent-company s request, the petitioner incurred liabilities to third parties who claimed they were lawful holders of one or more of the bills of lading in question. Legal proceedings were initiated against the petitioner by these third parties, and judgment obtained. The petitioner invoked the indemnities. After its action in England against the Bank of Saurashtra failed, it brought suit there against the respondentcompany. Despite being duly served, the respondent-company did not enter appearance or file a defence. The petitioner moved the English court for a summary judgment u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal court. What remained was the learned single Judge s finding of fact that the judgment of the UK Court was a decision on merits by a competent court, and hence did not fall afoul of the parameters of Section 13 of the CPC. Neither of these decisions is, therefore, of assistance to Mr. Narula. 10. The decision of a Division Bench of the Gauhati High Court in Kitply Industries Ltd. vs California Pacific Trading Corporation [2008] 142 Comp Cas 286 (Gau) is, however, one where there was a decree of a court in a nonreciprocating foreign territory. It was contended by the appellantcompany (the original respondent to the winding up petition) that the decree, of a District Court in North Carolina, USA, was not executable and was no debt at all. It required adjudication, and the petitioning-creditor would have to file a suit on it to make it a rule of the Court. In that civil proceeding, the petitioner-creditor, as plaintiff, would have to show that the requirements of Section 13 of the CPC were satisfied. It was, however, pointed out that the judgment of the District Court in America was one on merits. The appellant had been served. It entered appearance, but later withdrew. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Tel Aviv-Jaffa. The petitioning-creditor filed a counter-claim, inter alia for loss of profit. This counter-claim was decreed, and the claim of the respondentcompany (the Indian entity) for recovery of the price of goods sold and delivered was rejected. The decision was on merits. Since the Indian party, the respondent-company, had initiated proceedings, it could hardly contend that the decision was not of a competent court. The proceedings thus resulted in a decree in favour of the petitioning-creditor, a foreign entity, against the Indian respondentcompany. The petitioning-creditor relied inter alia on the decision of the learned single Judge of this Court in China Shipping to contend that the respondent-company could no longer contend that the judgment of the magistrate in Tel Aviv was not binding and not an enforceable debt. That judgment, the petitioning-creditor said, created a liability and a debt. Since that had remained unpaid, winding up should be ordered. 13. Learned senior counsel for the respondent-company disputed this formulation of the law. He relied on Section 13(c) of the CPC read with Section 44A. Israel was not, he argued, a reciprocating state. A decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e one of an Indian court, Intesa could not be said to be Videocon s creditor under Section 439 of the Companies Act, 1956. The Turin decree was not on merits and was opposed to natural justice and did not, therefore, satisfy the tests of Section 13 of the CPC. 15. On a close examination of the facts, the Court found that the petition was not, in fact, based on the Turin decree but on the patronage letter and subsequent admissions made by Videocon. It also repelled the submissions that the cause of action, if any, on the patronage letter had merged with the decree of the Turin court; that the Turin court had exclusive jurisdiction; and that the claim based on the Turin decree was beyond limitation. Of the many decisions cited before the Intesa court, two are immediately germane. The first, of course, is that of the learned single Judge in China Shipping. The second is of a learned single Judge of the Gujarat High Court in Vanguard Textiles Ltd v GHCL Ltd. Company petition 20 of 2009, decided on 26th August 2009 As in China Shipping, Vanguard Textiles too was a decision that arose out of a decree obtained in the United Kingdom. That being a reciprocating State, the decree could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the original cause of action. He therefore said that merely because a decree had been obtained overseas, that could not prevent a creditor from presenting a petition independently of the decree on the original or underlying cause of action. The argument was that such a petitioner need not wait till the foreign decree was made a decree of an Indian court; he could file on the original cause of action straightaway. What Mr. Narula asks of me is something else altogether: to do away with the requirement of filing a suit on the foreign decree or on the original cause of action or both, and to grant him relief in a winding up petition based only on the foreign decree, with no regard at all to Section 13 of the CPC. That can only mean this: that Section 13 must be confined to civil proceedings, and for the purposes of a winding up petition it is permissible to ignore it altogether. I do not see how this can possibly be done. 17. There are, as I see it, some material points of distinction between Intesa and the present case. In Intesa, a suit had already been filed on the foreign (Turin) decree. It was pending. That suit could only have been under Section 13 of the CPC. The wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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. 44A. Execution of decrees passed by Courts in reciprocating territory (1) Where a certified copy of a decree of any of the superior Courts of any reciprocating territory has been filed in a District Court, the decree may be executed in India as if it had been passed by the District Court. (2) Together with the certified copy of the decree shall be filed a certificate from such superior Court stating the extent, if any, to which the decree has been satisfied or adjusted and such certificate shall, for the purposes of proceedings under this section, be conclusive proof of the extent of such satisfaction or adjustment. (3) The provisions of section 47 shall as from the filing of the certified copy of the decree apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and weighed the plaintiffs case and assessed his evidence, it will be on merits, notwithstanding that it is ex-parte. Where however, there is a summary disposal of the case under some special statutory provision that obviates an examination of the merits and the taking of evidence, such a decree is not executable in India. Thus, for instance, if there is an immediate default summary judgment only on account of the defendants failure to appear and without any examination of the material or the evidence, that judgment is not enforceable in India. International Woollen Mills, supra In short, if a foreign judgment falls under any of the Clauses (a) to (f ) of Section 13, it is not conclusive as to any matter thereby adjudicated upon. The judgment is open to collateral attack on the grounds mentioned in the clauses of Section 13. Smt. Satya v Shri Teja Singh, (1975) 1 SCC 120 The elaborate discussion by the Supreme Court in International Woollen Mills v Standard Wool (UK) Ltd. AIR 2001 SC 2134; (2001) 5 SCC 265; cited in China Shipping and Intesa. ultimately leads to one pithy conclusion: a decree that follows a judgment that is not on merits cannot be enforced in India: ...Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore held that a winding up petition based on that decree was maintainable. The debt in a winding up proceeding must be one that is due eo instanti, both debitum in praesenti and solvendum in praesenti. Tower Vision India Pvt Ltd v Procall Private Limited, [2013] 112 CLA 364 (Delhi) It must be due at the date of the petition. It is not every debt that can form the foundation of a winding up petition: a petition will not, for instance, be admitted or allowed on a time-barred debt. It is for the petitioning-creditor to show that the debt on which the petition is brought is due and payable on the date of the petition. Vijaylakshmi Art Productions v Vijaya Productions (P) Ltd., [1997] 88 Com Cas 353 (Mad) A debt due is a sum now payable, in praesenti. Union of India v Raman Foundry, AIR 1974 SC 1265; Kesoram Industries Cotton Mills Ltd. vs Commissioner of Wealth-Tax (Central), Calcutta, [1966] 59 ITR 767; AIR1 966 SC 1370 Clearly, that must mean a sum payable now in India, according to Indian law. If a foreign decree of a non-reciprocating territory needs to be made a rule of an Indian court to become an enforceable debt, I cannot see how, without passing through the filter of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of evidence against Coastal Marine. There were four defendants to the suit in Houston. The only reference to Coastal Marine in the Houston court s order is at internal page 6 (of Exhibit 1 to the affidavit in rejoinder): Defendants Rai and COMACOE [Coastal Marine] are in default. (See Doc.54.) Rai is not a minor or an incompetent person. Neither Rai nor COMACOE have appeared in this action. MGLLC [Marine Geotechnics] is therefore entitled to a default judgment against Rai and COMACOE. Defendants Rai, COMACOE, QVC and Mumford are jointly and severally liable for MGLLC s damages. 25. The entire petition is based on, and only on, the Houston decree. There is no mention in the petition of the original cause of action. Mr. Narula s submission that the Houston decree was on merits is not one that I am prepared to accept. There is no reference to Coastal Marine in any part of the preceding discussion. The only discussion on summary judgment evidence is at internal page 5, and none of it is in relation to Coastal Marine, which is not mentioned even once. Section 13 uses the words any matter thereby directly adjudicated upon . The word matter means the right claimed, not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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