Messer Griesheim Gmbh (Now Called Air Liquide Deutschland Gmbh) vs. Goyal Mg Gases Private Limited

REPORTABLE
IN THE SUPREME COURT OF INDIA
2026 INSC 401
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2026
ARISING OUT OF SLP (C) NO. 4774 OF 2023


MESSER GRIESHEIM GMBH (NOW CALLED AIR
LIQUIDE DEUTSCHLAND GMBH) ...APPELLANT(S)

VERSUS

GOYAL MG GASES PRIVATE LIMITED …RESPONDENT(S)

J U D G M E N T

Contents
2
I. Introduction ...........................................................................................................
II. Facts ...................................................................................................................... 3
III. Judgment of the English Court and the Execution Proceedings initiated by
7
Appellant ...................................................................................................................
IV. Analysis of the Impugned Order ...................................................................... 10
11
V. Submissions .......................................................................................................
A. On behalf of the Appellant ............................................................................. 11
............................................................................... 14
B. On behalf of Respondent
VI. Statutory Scheme Governing Enforcement of Foreign Judgments ............. 16
20
VII. Issues for consideration .................................................................................
Re: Issue I. Whether the judgment of the English Court is in consonance with
the requirements of Section 13 of CPC read with 44A. ................................... 20
Signature Not Verified
Re: Issue II. Whether the judgment is unenforceable in view of the conditions
................... 39
imposed by RBI in exercise of the statutory power under FERA
Digitally signed by
KAPIL TANDON
Date: 2026.04.21
18:29:31 IST
Reason:
(i) Findings of the English Court on RBI communication dated
03.09.1997 ........................................................................................................ 47
Page 1 of 61

(ii) Findings of the Single Judge .............................................................. 47
(iii) Findings of the Division Bench ........................................................... 48
(iv) True import of Section 47, FERA and RBI conditions dated
03.09.1997…………………………………………………………………………… 50
(v) The stage at which the RBI permission is required .......................... 52
VIII. Conclusions .................................................................................................... 61

I. Introduction
1. Leave granted.
2. This civil appeal is against the judgment and order passed by the
1
Division Bench of the High Court of Delhi , refusing to enforce a foreign
judgment passed by the High Court of Justice, Queens Bench Division
(English Court) for being non-compliant of the requirements of Section 13
of the Code of Civil Procedure, 1908 (CPC). Two questions have arisen
for our consideration. The first relates to the enforceability of the summary
judgment on the ground that it violates principles of natural justice for not
giving sufficient opportunity to the respondent/defendant. The second
relates to the bar of enforcement in view of the conditional prior permission
given by the Reserve Bank of India (RBI) under the repealed Foreign
Exchange Regulation Act, 1973 (FERA).
2.1 For the reasons to follow, we have explained how shifting from its
‘default judgment’ to a summary jurisdiction and proceeding to decree the

1
In EFA(OS) No. 3/2014, dated 21.12.2022.
Page 2 of 61

suit filed by appellant, after dismissing the respondent’s application for
leave to defend has denied fair trial to respondent, thereby rendering the
foreign judgment unenforceable as per Section 13 CPC. We have thus
upheld the decision of the Division Bench and dismissed the Civil Appeal.
2.2 In this view of the matter, the other question did not arise for
consideration. However, in order to clarify the position of law and in view
of the detailed submissions of learned counsels, we answered the issue
and held that under Section 47 of FERA, there is a distinction between the
‘legal proceedings being brought in India’ and ‘no steps shall be taken for
the purpose of enforcing.’ While there is no prohibition for initiating legal
proceedings, but before taking necessary steps for enforcement of the
decree, permission of the Central Government/RBI is necessary. In other
words, while there is no bar for Courts to determine and adjudicate the
liability, its enforcement will be subject to the regulatory regime of the
State. This interpretation balances the values of access to justice and the
regulatory control. To this extent, the judgment of the High Court stands
reversed on the principle of law as it applied at the relevant time.
II. Facts

3. The dispute originates from a Share Purchase and Co-operation
Agreement (SPCA) executed on 12.05.1995 between the appellant, a
foreign company and the respondent, an Indian Company, for establishing
Page 3 of 61

a joint venture company in India for manufacturing and conducting
business in industrial gases. Subsequently, by an addendum dated
07.11.1996, the appellant’s shareholding was increased from 30% to 49%,
and three nominee directors were appointed to the respondent’s Board.
On the same day, parties also entered into a Technical Collaboration
Agreement relating to the supply of helium gas.
4. At a Board meeting, the respondent made a decision to obtain
overseas borrowing for financing the acquisition of plants and machinery,
and the nominee directors of the appellant assured the arrangement of
such funds. This agreement fructified in arranging such funding through
Citibank UK (lender Bank), which sanctioned External Commercial
Borrowing (ECB) facility up to USD 7 million. The lender bank’s sanction
was subject to the respondent obtaining necessary approvals from the
Government of India and the RBI. That was a time when foreign exchange
was regulated under the FERA.
5. On 02.04.1997, the Government of India granted permission for the
ECB and directed the respondent to obtain RBI approval under the FERA.
The permission stipulated that, “no additional foreign exchange liability,
either express or implied, is being assumed under the arrangements.”
Thereafter, RBI granted an in-principle approval on 28.05.1997, subject to
compliance with the Government’s conditions and final RBI approval.
Page 4 of 61

6. On 30.06.1997, the respondent executed the Loan Agreement with
Citibank N.A., London, and the appellant irrevocably and unconditionally
guaranteed the due repayment and performance of all obligations of the
borrower and undertook to pay, upon first demand, any amount due and
payable by the borrower but remaining unpaid.
2
7. The Agreement provided that it would be governed by English law ,
and also that the parties submitted to the jurisdiction of the English Courts
for adjudication of disputes, waived objections to such forum, and
consented to the enforcement and execution of any judgment passed
3
against their properties. It was further stipulated that any judgment
obtained in England would be recognized and enforced, subject to the
4
provisions of Section 13 of CPC in case of enforcement in India. The

2
This Agreement shall be governed by, and shall be construed in
Clause 31.1 English Law:
accordance with English law.
3
Clause 31.2 English Courts : Each of the parties hereto irrevocably· agrees for the benefit of each of
the Agent, the Arranger and the Banks that the courts of England shall have jurisdiction to hear and
determine any suit, action or proceedings, and to settle any disputes, which may arise out of or in
connection with this Agreement (respectively "Proceedings" and "Disputes") and, for such purposes
irrevocably submits to the jurisdiction of such courts. 31.3 Appropriate Forum: Each of the Obligors
irrevocably waives any objection which it might now or hereafter have to the courts referred to in Clause
31.2 (English Courts) being nominated as the forum to hear and determine any Proceedings and to
settle any Disputes and agree not to claim that any such court is not a convenient or appropriate forum.
Clause 31.3 Appropriate Forum : Each of the Obligors irrevocably waives any objection which it might
now or hereafter have to the courts referred to in Clause 31.2 (English Courts) being nominated as the
forum to hear and determine any Proceedings and to settle any Disputes and agree not to claim that
any such court is not a convenient or appropriate forum.
Clause 31.6 Consent to Enforcement : Each of the Obligors hereby consents generally in respect of
any Proceedings to the giving of any relief or the issue of any 'process in connection with such
Proceedings including the making, enforcement or execution against any property whatsoever
(irrespective of its use or intended use) of any order or judgment which may be made or given in such
proceedings.
4
Clause 12.5 Governing Law and Judgments: In any proceedings taken in its jurisdiction of
incorporation in relation to this Agreement, the. choice of English law as the governing law of this
Agreement and any judgment obtained in England will be recognized and (subject, in the case of
enforcement in India, to the provisions of section 13 of the Code of Civil Procedure 1908 of India)
enforced.
Page 5 of 61

Obligors undertook to obtain and maintain all necessary authorisations
and approvals required under applicable laws to ensure the legality and
5
enforceability of the Agreement , and the Guarantor was entitled, upon
discharge of its obligations, to be subrogated to the rights of the lenders
6
against the Borrower.
8. On 24.07.1997, the Government of India recorded the loan
agreement and clarified that provisions inconsistent with its earlier
sanction would be void and not binding on the Government or RBI.
Subsequently, the RBI granted final approval on 12.08.1997 while leaving
the guarantee issue open. On 03.09.1997, the RBI permitted the
furnishing of a guarantee by the appellant, subject to two conditions: (i)
“There is no outgo of foreign exchange by way of any fee, direct or indirect,
for the proposed guarantee” and (ii) “in case of invocation of guarantee,
no liability whatsoever will extend to the Indian Company.”
9. During the period of 1997-1998, certain disputes concerning the
acquisition of another company by the appellant, which, according to the
respondent, was in violation of a non-compete clause contained in the

5
Each of the Obligors shall be obtain, comply with the
Clause 14.1 Maintenance of Legal Validity:
terms of and do all that is necessary to maintain in full force and effect all authorisations, approvals,
licences and consents required in or by the laws and regulations of its jurisdiction of incorporation to
enable it lawfully to enter into and perform its obligations under this Agreement and to ensure the
legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of this
Agreement.
6
Clause 16.12 Subrogation : When the Guarantor has met its obligations in full under this guarantee
and indemnity, it shall be subrogated· to the rights under this Agreement of the Banks and Agent against
the Borrower.
Page 6 of 61

SPCA, arose between the parties. Litigation ensued before the Bombay
High Court and Delhi High Court, however, details of such disputes are
not relevant for the present purposes.
10. While the parties were engaged in multiple proceedings across
judicial forums, the lender-bank, on 08.10.2001, invoked the guarantee
against the appellant due to default in repayment by the respondent. The
appellant promptly discharged the outstanding liability amounting to USD
4.78 million together with interest on 09.10.2001 and demanded
reimbursement by invoking the subrogation clause of the loan agreement.
Respondent failed to make payment and asserted that the amount paid
was in partial discharge of other liabilities owed by the appellant to the
respondent and not under subrogation rights.
III. Judgment of the English Court and the Execution Proceedings
initiated by Appellant:

11. On 17.01.2003, the appellant instituted proceedings before the
English Court seeking recovery of the amount paid under the guarantee.
Respondent did not enter appearance or file a reply, and consequently, on
06.02.2003, the English Court passed a default judgment directing
payment of USD 5,120,833.56 with interest at 8% per annum along with
costs.
Page 7 of 61

12. Thereafter, on 25.03.2003, the appellant issued a statutory notice
under Sections 433(e) read with 434(1)(a) of the Companies Act, 1956,
seeking winding up of the respondent-company based on the default
judgment. The respondent replied, contending that the foreign judgment
was not enforceable in India as it was passed ex parte and did not
constitute a judgment on the merits under Indian law.
13. Faced with the situation of unenforceability, the appellant applied for
the setting aside of the default judgment and requested the passing of a
summary judgment on the merits as per the rules of the UK High Court.
Respondent being duly served, contested the invocation of proceedings
before the English Court and contended that it has good defences on
merits and that, the adjudication should not be under summary
jurisdiction. Further, the respondent also contested that the default
judgment should not be set aside.
14. On 07.02.2006, the English Court, however, passed a summary
judgment against the respondent after setting aside the earlier default
judgment. Respondent was directed to pay USD 5,824,564.74 and Euro
31,364.74 together with interest at 8% per annum and costs of 90,000
Pounds. No appeal was filed by the respondent against the said judgment.
15. Thereafter, on 21.02.2006, the appellant sold its entire 49%
shareholding in the respondent company to existing shareholders,
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resulting in the respondent ceasing to be a joint venture company. On
26.04.2006, the appellant filed an execution petition before the Delhi High
Court under Section 44A of the CPC seeking execution of the UK decree
in India. A winding-up petition was also filed to enforce the decretal sum.
16. By judgment dated 29.11.2013, the learned Single Judge of the
Delhi High Court dismissed the respondent’s objections under Section 13
of CPC and held that the English Court’s judgment was passed on merits
and was enforceable in India. The Court also directed the respondent to
pay the decretal sum within twelve weeks and to secure the amount by
depositing title deeds of property free from encumbrances.
17. Aggrieved by the dismissal of the objections, the respondent filed
an appeal before the Division Bench, which by judgment dated
01.07.2014, held that the Delhi High Court was not a “District Court” under
Section 44A CPC and, therefore, lacked jurisdiction to execute the foreign
decree. Accordingly, the execution petition was directed to be transferred
to the competent District Court and the objections were to be decided
afresh. The said judgment was challenged before this Court.
7
this Court set aside the judgment
18. By judgment dated 28.01.2022
dated 01.07.2014, and held that jurisdiction to execute foreign decrees
under Section 44A vests in the Delhi High Court in exercise of its original

7
Griesheim GmbH v. Goyal MG Gases (P) Ltd., (2022) 11 SCC 549.
Page 9 of 61

civil jurisdiction. The appeal before the Division Bench was restored for
decision on merits.
IV. Analysis of the Impugned Order

19. The Division Bench of the Delhi High Court heard the appeal, and
by its judgment dated 21.12.2022, the appeal was allowed, and the order
dated 29.11.2013 of the Single Judge was set aside.
20. By the order impugned before us, it was held that the foreign
judgment was contrary to the provisions of law in force in India and had
been rendered without consideration of material evidence, thereby
attracting the bar under Section 13 of CPC. Upon examination of the
Balance Sheets and Minutes of the Meetings of the Board of Directors
dated 27.05.2002 and 31.01.2003, the Division Bench observed that
repayment of the loan by the appellant and its treatment as an adjustment
against the claims of the respondent had been expressly recorded therein.
It was further noted that the said documents were duly approved in
meetings attended by the nominee director of the appellant, who had
signed and seconded the resolutions, and that in view of Sections 211 and
215 of the Companies Act, 1956, such Balance Sheets were required to
present a true and fair view of the financial position of the company,
thereby indicating that no liability remained due from the respondent to
the appellant.
Page 10 of 61

21. The Division Bench further held that the English Court, while
passing summary judgment, had failed to consider material evidence,
including the aforesaid Balance Sheets, Minutes of Meetings and relevant
correspondence, particularly the e-mail dated 20.02.2003 issued by the
respondent disputing the alleged liability. It was also held that the
conditions imposed by the RBI in its approval dated 03.09.1997, including
the stipulation that no liability would be fastened upon the respondent
upon invocation of the guarantee, continued to govern the transaction.
The Division Bench observed that the English Court had neither taken into
account binding conditions nor the applicable legal regime prevailing at
the relevant time. In this view of the matter, the Division Bench held that
the foreign judgment does not satisfy the requirement of Section 13 of the
CPC for enforcement in India.
V. Submissions
A. On behalf of the Appellant
22. Learned senior counsel Dr A.M. Singhvi commenced his argument
by stating that this case serves as a classic example of the old saying that
the difficulties of the litigant in India begin when he has obtained a decree .
The submissions of the learned senior counsel can be formulated as
follows:
Page 11 of 61

22.1 Decree passed by the English Court was valid, binding and
enforceable in India, and did not fall within any of the exceptions
enumerated under Section 13 of the CPC. It was contended that upon
discharge of the outstanding loan liability pursuant to invocation of the
guarantee, the appellant became subrogated to the rights of the lender
under the Loan Agreement and was therefore entitled to recover the
amounts paid from the respondent.
22.2 The English Court was a court of competent jurisdiction, as the Loan
Agreement expressly provided that English law would govern the contract
and that disputes would be subject to the jurisdiction of the English Courts.
Respondent voluntarily submitted to the jurisdiction of the English Court
and participated in the proceedings without objecting to jurisdiction.
Respondent is estopped from raising any objections as regards the
judgment, decree and enforceability of the foreign judgment.
22.3 Decree passed by the English Court was a judgment on merits,
rendered after consideration of pleadings and evidence, and therefore did
not attract the bar under Section 13(b) of CPC. It was submitted that mere
adoption of a summary procedure or absence of cross-examination would
not render the decree opposed to natural justice, particularly when the
respondent had been afforded sufficient opportunity to contest the
proceedings.
Page 12 of 61

22.4 Further, the decree was not contrary to Indian law and did not violate
the provisions of the FERA or any RBI conditions. It was contended that
even assuming that regulatory permissions were required, such
permission could be obtained at the stage of remittance and not prior
8
thereto. It was also urged that the repeal of the FERA and its replacement
by the Foreign Exchange Management Act indicated a liberalised regime
governing foreign exchange transactions, thereby removing any
impediment to the enforcement of the decree.
22.5 RBI had issued subsequent circulars granting general permission
for repayment by an Indian borrower to a foreign guarantor, and that such
circulars superseded earlier conditional approvals relied upon by the
respondent. Learned senior counsel contended that the conditions
imposed by the RBI were regulatory in nature and did not extinguish the
contractual rights of subrogation arising in favour of the appellant upon
payment under the guarantee.
22.6 Appellant also denied that the Balance Sheets and financial
statements of the respondent constituted any admission of non-liability. It
was submitted that the appellant had consistently recorded dissent to the
treatment of the loan in the financial statements and had sought

8
For the purpose he relied on the decision of this Court in Renusagar Power Co. vs. General Electric
(1994) Supp. (1) SCC 644; LIC Vs. Escort (1986) 1 SCC 264.
Page 13 of 61

reconstitution of the Board and an independent audit of accounts. It was
urged that objections relating to findings of fact by the English Court could
not be raised in execution proceedings in India once the foreign judgment
had attained finality.
22.7 Lastly, it was stated that an executing court cannot go behind the
decree.
B. On behalf of Respondent
23. Learned senior counsel, Mr P. Chidambaram, appeared on behalf
of the respondent and supported the conclusions drawn by the Division
Bench of the High Court of Delhi, holding that the foreign decree is
unenforceable under Section 13 read with Section 44A of CPC. Details of
his submissions are as follows:
23.1 The primary submission is that the judgment of the English Court is
not enforceable in India, as it is contrary to the provisions of Section 13 of
the CPC. It is contended that fastening liability upon the respondent
pursuant to the invocation of the guarantee is in violation of the statutory
permissions granted by the RBI under the FERA, 1973, which expressly
stipulated that no liability would extend to the Indian company in the event
of the invocation of the guarantee.
Page 14 of 61

23.2 The English Court had ignored the mandatory provisions of Indian
law, including the conditions imposed by the RBI, while granting approval
for the loan transaction. Such permissions formed an integral part of the
transaction and were binding upon the parties, and that disregard of those
statutory conditions rendered the foreign judgment liable to be refused for
enforcement under Section 13(c) and Section 13(f) of the CPC.
23.3 Provisions of FERA continued to apply notwithstanding its repeal,
as the permissions granted thereunder were preserved under the savings
clause contained in the Foreign Exchange Management Act, 1999
(FEMA). It is further submitted that any transaction undertaken in violation
of mandatory permissions granted under the earlier regime would remain
unenforceable in law.
23.4 Balance sheets and financial statements of the respondent for the
relevant years clearly reflect that there exists no subsisting liability upon
the respondent, and that the relevant documents were duly approved and
signed by the concerned parties, including the nominee director of the
appellant. He would submit that under the provisions of the Companies
Act, 1956, such financial statements constituted an admission of the
financial position of the company and could not be disregarded while
determining liability.
Page 15 of 61

23.5 Judgment of the English Court was not rendered on the merits, and
the respondent was not afforded an adequate opportunity to defend the
proceedings. Learned senior counsel contended that the absence of a full
trial, including opportunity for cross-examination, and the summary nature
of the proceedings resulted in a violation of principles of natural justice.
23.6 RBI circulars dated 01.07.2013 and 10.12.2021, relied upon by the
appellant, are inapplicable as they pertain only to cases where the creditor
bank is in India, and the creditor bank in the present case is in England.
Nonetheless, even if the abovementioned circulars were applicable, the
specific permission issued by the RBI in exercise of its statutory powers
has statutory force and would not be considered rescinded by the general
circular.
23.7 Judgment of the English Court is in violation of Indian laws, namely
the FERA, the Companies Act and the RBI directions that have force of
law in India, hence on this ground alone the enforcement of the foreign
judgment must be denied.
VI. Statutory Scheme Governing Enforcement of Foreign Judgments :
24. The statutory framework governing the recognition and enforcement
of foreign judgments in India is principally contained in Sections 2(5), 2(6),
13, 14, and 44A of the CPC. Section 2(6) defines a “foreign judgment” as
Page 16 of 61

the judgment of a foreign court, while Section 2(5) defines a “foreign court”
as a court situated outside India and not established by the authority of
the Central Government.
25. The procedural mechanism for the execution of foreign decrees is
primarily governed by Section 44A CPC, which provides a special mode
for the enforcement of decrees passed by superior courts of reciprocating
territories. Under sub-section (1) of Section 44A, a certified copy of a
decree passed by a superior court of a reciprocating territory may be filed
in a District Court in India, and the decree may thereafter be executed as
if it had been passed by the District Court itself. The expression
“reciprocating territory” under Section 44A refers to any country or territory
outside India which the Central Government may, by notification in the
Official Gazette, declare to be a reciprocating territory for the purposes of
the section.
26. The enforcement of a foreign decree can be refused if it is shown to
the satisfaction of the Court that the decree falls within any of the
exceptions specified in clauses (a) to (f) of Section 13. Section 13 is
reproduced herein for ready reference:
“ 13. When foreign judgment is not conclusive .—A foreign
judgment shall be conclusive as to any matter thereby directly
adjudicated upon between the same parties or between parties
under whom they or any of them claim litigating under the same
title, except—
Page 17 of 61

(a) where it has not been pronounced by a Court of competent
jurisdiction;
(b) where it has 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. ”
27. The legislative intent underlying Section 13 reflects the principle of
comity of courts and recognition of final adjudications rendered by
competent foreign tribunals, subject only to narrowly construed
9
exceptions. The principles governing conclusiveness under Section 13
CPC may broadly be summarised as follows:
(a) Court of competent jurisdiction : A foreign judgment is not conclusive
unless it is pronounced by a court of competent jurisdiction, both under
the law of the foreign country and in the international sense recognised
10
under private international law.
(b) Judgment to be on Merits : A judgment must be rendered on merits,
meaning that the court must have considered the evidence and
adjudicated upon the substantive rights of the parties. A decree passed

9
Alcon Electronics (P) Ltd. v. Celem S.A. of France, (2017) 2 SCC 253.
10
R. Viswanathan vs Rukn-Ul-Mulk Syed Abdul Wajid, 1962 SCC OnLine SC 112.
Page 18 of 61

mechanically, by default, or without examination of the objections would
11
not be conclusive.
(c) Incorrect View of International Law or Refusal to Recognise Indian
Law : A foreign judgment would not be conclusive where it is founded on
an incorrect view of international law or refuses to recognise the law of
12
India in cases where such law is applicable.
(d) Proceedings Opposed to Natural Justice : A judgment rendered in
violation of principles of natural justice, including absence of proper notice
or denial of opportunity of hearing, is not enforceable. The requirement of
natural justice relates to procedural fairness and not to the correctness of
13
the decision on merits.
(e) Judgment Obtained by Fraud: foreign judgment obtained by fraud is
not entitled to recognition, and the fraud contemplated includes not only
14
fraud on merits but also fraud relating to jurisdictional facts.
(f) Judgment Sustaining a Claim Founded on Breach of Indian Law:
foreign judgment sustaining a claim that is contrary to Indian law in force
shall not be recognised or enforced in India.

11
Alcon Electronics (P) Ltd (supra); China Shipping Development Co. Ltd. v. Lanyard Foods Ltd., (2008)
142 Comp Cas 647.
12
Y. Narasimha Rao v. Y. Venkata Lakshmi, (1991) 3 SCC 451.
13
Sankaran Govindan v. Lakshmi Bharathi, (1975) 3 SCC 351; R. Viswanathan (supra).
14
Satya v. Teja Singh, (1975) 1 SCC 120.
Page 19 of 61

VII. Issues for consideration
28. On the basis of the submissions advanced by the appellant and the
respondent, two broad issues arise for consideration.
I. Whether the judgment of the English Court is in consonance with
the requirements of Section 13 of CPC read with 44A.
II. Whether the judgment is rendered unenforceable in view of the
conditions imposed by RBI in exercise of the statutory power under
FERA.
Re: Issue I. Whether the judgment of the English Court is in
consonance with the requirements of Section 13 of CPC read with
44A.

29. As already indicated, pursuant to the permission granted by RBI,
Citibank disbursed the loan on 28.10.1997. It is a matter of record that
respondent even paid first two instalments on 23.09.1999 and 30.09.2000.
It is in this backdrop that the facts leading to initiation of the present legal
proceedings and concluding with the judgment impugned be required to
be examined in detail.
30. Certain disputes relating to alleged breaches of the SPCA and
TSSA, particularly concerning the non-compete clause, arose between
the appellant and the respondent. Around the same time, the appellant
seem to have expressed its intention to disinvest in India. In view of the
pending rights and liabilities of the parties, particularly in view of the
Page 20 of 61

alleged claim of approximately Rs. 500 Crore of the respondent against
the appellant, parties are stated to have arrived at a mutual understanding
that the appellant would discharge the respondent’s debt to the lender
bank, as a set off to the claims of the respondent.
31. It is the case of the respondent that instead of abiding by the terms
of the agreement, appellant initiated legal proceedings before the English
Court. This resulted in a default judgment dated 06.02.2003 directing the
respondent to pay USD 5,120,833.56 with interest at 8% per annum,
along with costs. Having realised the difficulty in enforcing a default
judgment, the appellant filed an application on 06.07.2005 seeking its
recall and for passing of a summary judgment. Consequently, the
application was accepted and summary proceedings were permitted.
32. Before the English Court, the respondent raised various defences,
including those relating to the three agreements said to be subsisted
between the parties. These defences are also recorded in the UK
judgment and are reproduced hereinbelow for ready reference:
"Defences"
“10. In reaching decisions on both applications, I think it essential
first to consider the merits of Goyal's response to the substance
of the claim made by Messer under the loan agreement. The
basis of the response is to be found in two witness statements
made by Mr Dhar, now the Deputy General Manager of Goyal.
Goyal rely on three separate alleged agreements, albeit Mr
Nash, counsel for Goyal, made it clear that the first was not put
forward at the present hearing as itself providing any defence to
the claim by Messer and the third is of more direct relevance to
Page 21 of 61

the exercise of the court's discretion in deciding whether or not
to set aside the default judgment.
11. The first agreement is said to have been made orally at a
meeting of Goyal' s board on 13 June 1997, and so some 2
weeks before the loan agreement was executed. Mr Dhar' s
evidence is that it was then agreed that, in the event that Messer
was called upon to pay under the proposed guarantee to be
given to Citibank, it would not have recourse to either the other
shareholders in Goyal or Goyal. I shall refer to this alleged
agreement as "the June 1997 non-recourse agreement”.
12. The second ( also oral) agreement is said to have been made
in August and September 2001. Messer is alleged to have
agreed to pay the amounts outstanding under the loan
agreement and not to look for repayment from Goyal. In April
2001, Goyal's lawyers in India had written to Messer making
unspecified allegations of breaches by Messer of both the SPCA
and the TSSA and claiming INR 5 billion (some US $ 111m) in
damages. Mr Dhar's evidence is that he and Mr Goyal
(representing the Indian shareholders of Goyal) had discussed
the claim by Goyal in August and September 2001 with a Mr
Allcock, one of Messer's nominated directors on the board of
Goyal. Mr Dhar says that Mr Allcock wanted to reach a
compromise and Messer was prepared to compensate Goyal
and to continue with the joint venture. Mr Dhar continued:
"We discussed the settlement of Goyal' s claims against Messer,
Goyal made it clear that it would only be prepared to settle the
claims if Messer accepted responsibility for the balance owed by
Goyal under the Loan Agreement. This was of critical importance
to Goyal because a large proportion of that loan had been
invested in assets which had to be written off after the disputes
with Messer had arisen…. In return, Goyal would be responsible
for the domestic borrowing and Goyal and the Goyal
shareholders would not pursue certain claims against Messer.
This deal was agreed between Mr Goyal and myself on behalf of
the Goyal shareholders and Mr Allcock on behalf of Messer in
September 2001. The parties proceeded with the joint venture in
good faith. The agreement set out above was considered by the
Goyal shareholders to be a sensible commercial deal that would
avoid further litigation with Messer. It was agreed that the
particulars of this agreement would be discussed and finalised
after Mr Allcock had discussed with his colleagues what was
required to formalise the agreement.”
13. I shall refer to this alleged agreement as the September 2001
Agreement.
Page 22 of 61

14. The third agreement (also oral) on which Goyal (by Mr Dhar's
evidence) relies is an agreement, or at least a representation, by
Messer prior to the commencement of the proceedings in this
court, that the proceedings were being brought for Messer’s own
internal purposes and, whilst they would culminate in a default
judgment, that judgment would not be enforced. I shall refer to
this alleged agreement as the December 2002 Agreement.
15. It is Mr Foxton’s submission, on behalf of Messer, that these
alleged agreements are "so lacking in credibility and cogency,
and so inconsistent with the verifiable facts, that they cannot
begin to justify a refusal to set aside the default judgment” nor
provide, should it prove to be material, any real prospect of a
successful defence to Messer's claim under CPR 24.2. I agree,
I must therefore set out as succinctly but, I hope, sufficiently as I
can my reasons for that conclusion.”

33. The English Court proceeded to pronounce summary judgment after
rejecting the respondent’s application for leave to defend. It would be
apposite, before proceeding further, to reproduce the operative portion of
the judgment rendered by the English Court:
“Summary Judgment
54. I have already addressed such defences as Goyal has
sought to raise. None, in my judgment, provide any real prospect
of a defence to the claim succeeding. Messer is entitled to
summary judgment. No issues have been raised on the amount
of the claim. At 16 January 2006 the claim was for the principal
sum of US$ 4,794,762.98 together with interest calculated in
accordance with the loan agreement of US$ 996,842.94. A small
further amount of interest will be due when this judgment is
handed down. There is also a claim under clause 17.5 of the loan
agreement to recover certain legal fees. If there are any points
to be made on the precise amount of the Part 24 judgment to be
entered they should be raised when this judgment is handed
down if they cannot be agreed beforehand.”

34. The principles relating to foreign determination acquiring the status
of enforceability under Section 13 CPC is well articulated in the decision
Page 23 of 61

15
of this Court in, Alcon Electronics (P) Ltd. v. Celem S.A. of France , this
Court noted that:
“ 14. A plain reading of Section 13 CPC would show that to be
conclusive an order or decree must have been obtained after
following the due judicial process by giving reasonable notice
and opportunity to all the proper and necessary parties to put
forth their case. When once these requirements are fulfilled, the
executing court cannot enquire into the validity, legality or
otherwise of the judgment.
16….. A judgment can be considered as a judgment passed on
merits when the court deciding the case gives opportunity to the
parties to the case to put forth their case and after considering
the rival submissions, gives its decision in the form of an order
or judgment, it is certainly an order on merits of the case in the
context of interpretation of Section 13(c) CPC. ”

35. Reference must also be made to observations of this Court in
16
Sankaran Govindan v. Lakshmi Bharathi where it was held as under;
“ 40….. The expression “contrary to natural justice” has figured
so prominently in judicial statements that it is essential to fix its
exact scope and meaning. When applied to foreign judgments,
it merely relates to the alleged irregularities in procedure adopted
by the adjudicating court and has nothing to do with the merits
of the case. If the proceedings be in accordance with the practice
of the Foreign court but that practice is not in accordance with
natural justice, this Court will not allow it to be concluded by
them. In other words, the courts are vigilant to see that the
defendant had not been deprived of an opportunity to present his
side of the case. The wholesome maxim audi alteram partem is
deemed to be universal, not merely of domestic application, and
therefore, the only question is, whether the minors had an
opportunity of contesting the proceedings in the English court
…”


15
(2017) 2 SCC 253.
16
(1975) 3 SCC 351.
Page 24 of 61

36. Further, this Court has taken a view in International Woollen Mills v.
17
Standard Wool (U.K.) Ltd. that;
“ 17. ….To say that a decree has been passed regularly is
completely different from saying that the decree has been
passed on merits. An ex parte decree passed without
consideration of merits may be a decree passed regular if
permitted by the rules of that court. Such a decree would be valid
in that country in which it is passed unless set aside by a court
of appeal. However, even though it may be a valid and
enforceable decree in that country, it would not be enforceable
in India if it has not been passed on merits.
18. In the case of Middle East Bank Ltd. v. Rajendra Singh
Sethia a decree had been passed ex parte and without service
of notice on the judgment-debtor. A number of authorities were
cited before the Court including the case of Abdul Rahim. The
Court held that even though a decree may be ex parte it may still
be on merits provided it could be shown that the court had gone
through the case made out by the plaintiff and considered the
same and taken evidence of the witnesses put up by the plaintiff.
It was held that if an ex parte decree was passed in a summary
manner under a special procedure without going into the merits
and without taking evidence then those decrees would not be
executable in India. Based on this authority it was submitted that
a decree could be said to be not on merits only if it is passed in
a summary manner in any special or summary procedure. It was
submitted that such a decree i.e. a decree which has not been
passed in a summary manner in a summary proceeding would
be a decree on merits. This authority itself makes it clear that the
decree would not be on merits if the court has not gone through
and considered the case of the plaintiff and taken evidence of
the witnesses of the plaintiff. It must also be noted that in this
case the Court ultimately held that the decree concerned was
not a decree on merits.”
( emphasis supplied)
37. In the execution proceedings, Ld. Single Judge took the view that
the summary judgment of the English Court was pronounced after hearing

17
(2001) 5 SCC 265.
Page 25 of 61

the parties and after examining the witness statements. However, the
Division Bench, by the order impugned before us observed as under;
“ 63. ….By not affording an opportunity to appellant/JD to defend
its case, the English Court has not only deprived appellant/JD of
its legitimate rights to defend itself but also it is against the
interest of justice. Even if it is taken that the appellant’s case was
premised on weak foundation; at least an opportunity to stand
before the Court should have been afforded to the appellant/JD.”
(emphasis supplied)
38. We must also make a reference to the decision of this Court in IDBI
18
Trusteeship Services Ltd. v. Hubtown Ltd. wherein principles relating to
grant of leave to defend after amendment of Order XXXVII Rule 3 CPC
have been formulated in the following manner:
“17. Accordingly, the principles stated in para 8 of Mechelec
case [will now stand superseded, given the amendment of Order
37 Rule 3 and the binding decision of four Judges in Milkhiram
case , as follows:
17.1. If the defendant satisfies the court that he has a
substantial defence, that is, a defence that is likely to succeed,
the plaintiff is not entitled to leave to sign judgment, and the
defendant is entitled to unconditional leave to defend the suit.
17.2. If the defendant raises triable issues indicating that he
has a fair or reasonable defence, although not a positively good
defence, the plaintiff is not entitled to sign judgment, and the
defendant is ordinarily entitled to unconditional leave to defend.
17.3. Even if the defendant raises triable issues, if a doubt is
left with the trial Judge about the defendant's good faith, or the
genuineness of the triable issues, the trial Judge may impose
conditions both as to time or mode of trial, as well as payment
into court or furnishing security. Care must be taken to see that
the object of the provisions to assist expeditious disposal of
commercial causes is not defeated. Care must also be taken to
see that such triable issues are not shut out by unduly severe
orders as to deposit or security.

18
(2017) 1 SCC 568
Page 26 of 61

17.4. If the defendant raises a defence which is plausible but
improbable, the trial Judge may impose conditions as to time or
mode of trial, as well as payment into court, or furnishing
security. As such a defence does not raise triable issues,
conditions as to deposit or security or both can extend to the
entire principal sum together with such interest as the court feels
the justice of the case requires.
17.5. If the defendant has no substantial defence and/or
raises no genuine triable issues, and the court finds such
defence to be frivolous or vexatious, then leave to defend the
suit shall be refused, and the plaintiff is entitled to judgment
forthwith.
17.6. If any part of the amount claimed by the plaintiff is
admitted by the defendant to be due from him, leave to defend
the suit, (even if triable issues or a substantial defence is raised),
shall not be granted unless the amount so admitted to be due is
deposited by the defendant in court.”

39. Further, following IDBI (supra), this Court in B.L. Kashyap & Sons
19
Ltd. v. JMS Steels and Power Corporation reiterated the principles in
following manner:
“ 33. It is at once clear that even though in IDBI Trusteeship ,
this Court has observed that the principles stated in para 8
of Mechelec Engineers case shall stand superseded in the wake
of amendment of Rule 3 of Order 37 but, on the core theme, the
principles remain the same that grant of leave to defend (with or
without conditions) is the ordinary rule; and denial of leave to
defend is an exception. Putting it in other words, generally, the
prayer for leave to defend is to be denied in such cases where
the defendant has practically no defence and is unable to give
out even a semblance of triable issues before the court.
33.2. Thus, it could be seen that in the case of substantial
defence, the defendant is entitled to unconditional leave; and
even in the case of a triable issue on a fair and reasonable
defence, the defendant is ordinarily entitled to unconditional
leave to defend. In case of doubts about the intent of the
defendant or genuineness of the triable issues as also the
probability of defence, the leave could yet be granted but while
imposing conditions as to the time or mode of trial or payment or
furnishing security. Thus, even in such cases of doubts or

19
(2022) 3 SCC 294.
Page 27 of 61

reservations, denial of leave to defend is not the rule; but
appropriate conditions may be imposed while granting the leave.
It is only in the case where the defendant is found to be having
no substantial defence and/or raising no genuine triable issues
coupled with the court's view that the defence is frivolous or
vexatious that the leave to defend is to be refused and the
plaintiff is entitled to judgment forthwith. Of course, in the case
where any part of the amount claimed by the plaintiff is admitted
by the defendant, leave to defend is not to be granted unless the
amount so admitted is deposited by the defendant in the court.
33.3. Therefore, while dealing with an application seeking
leave to defend, it would not be a correct approach to proceed
as if denying the leave is the rule or that the leave to defend is
to be granted only in exceptional cases or only in cases where
the defence would appear to be a meritorious one. Even in the
case of raising of triable issues, with the defendant indicating his
having a fair or reasonable defence, he is ordinarily entitled to
unconditional leave to defend unless there be any strong reason
to deny the leave. It gets perforce reiterated that even if there
remains a reasonable doubt about the probability of defence,
sterner or higher conditions as stated above could be imposed
while granting leave but, denying the leave would be ordinarily
countenanced only in such cases where the defendant fails to
show any genuine triable issue and the court finds the defence
to be frivolous or vexatious. ”
(emphasis supplied)
40. Even while a Court adjudicates and determines a lis in summary
jurisdiction, the Court must determine whether the defendant has a
“realistic”, as opposed to a merely “fanciful” prospect of success. A claim
can be regarded as realistic only where it carries a degree of conviction
and is more than merely arguable. At the same time, the jurisdiction to
grant summary judgment is not intended to convert the proceeding into a
“mini-trial”, but rather to enable cases where there is no real prospect of
success to be disposed of summarily. Nevertheless, the court is not
required to accept factual assertions at face value without analysis,
Page 28 of 61

particularly where such assertions are contradicted by contemporaneous
records. In forming its opinion, the court must consider not only the
material actually placed before it at the summary stage but also such
evidence as may reasonably be expected to be available at trial. Further,
even where a matter does not initially appear complex or where no
immediate conflict of fact is evident, the court ought to exercise caution in
rendering a final determination without trial if reasonable grounds exist to
believe that a fuller investigation into the facts may materially affect the
outcome of the case.
41. We may now advert to the issue as to whether a judgment passed
by a Foreign Court in a summary manner, by refusing to grant leave to
defend, can be regarded as having been rendered “on the merits”. A
decree passed by Foreign Court may be treated as having been rendered
“on the merits” where the Court has applied its mind to the substantive
issues of the case. Conversely, where a decree is passed without any
investigation into merits, it cannot be said to have been rendered “on the
merits” within the meaning of Section 13(b) of the CPC. The Privy Council
20
in Daniel Thomas Keymer v. P. Viswanatham Reddi dealt with the issue
whether a decree passed by the Foreign Court, in a case, where the
defence was struck off, could be treated as one rendered on the merits.

20
AIR 1916 PC 121.
Page 29 of 61

The Privy Council answered the said issue in the negative, holding that
such a decision could not be regarded as one on merits of the case within
the meaning of Section 13(b) of the CPC. The aforesaid legal proposition
was approved in L. Oppenheim and Co. v. Hajee Mahomed Haneef
21
Sahib , wherein it was held that the decision of the English Court
rendered in default of appearance, cannot be treated as one “on the
merits”. A similar view has been taken by Rajasthan High Court in O.P.
22
Verma v. Lala Gehrilal , by the Madras High Court in K.M. Abdul Jabbar
23
v. Indo-Singapore Traders (P) Ltd. , as well as by the Calcutta High Court
24
in Middle East Bank Ltd. v. Rajendra Singh Sethia , which in our opinion,

lays down the correct principle of law.

21
AIR 1922 PC 120.
22
1960 SCC OnLine Raj 89.
“ 45. On an earnest and careful consideration of the provisions contained in this Order, we find it difficult
to hold that a decree passed in a suit brought under these provisions without going into the merits of
the case and because the defendant failed to appear or because he was not given leave to defend can
be held to be a judgment on the merits of the case. The crucial consideration which persuades us to
incline to this conclusion is that, in such a case, there is hardly any consideration of the contentions
raided on behalf of the defendant and the judgment happens to be given more as a matter of form or
technicality rather than after an investigation of the points involved.” (emphasis supplied)

23
1980 SCC OnLine Mad 186.
“ 7 ……Almost all the High Courts have taken a uniform view that a decree passed by a Court under the
summary procedure after refusing leave to defend sought for by the defendant is not a judgment on
merits. As a matter of fact, no decision of any Court has been cited before me by learned counsel for
the first respondent taking a contrary view….”

24
1990 SCC OnLine Cal 247.
“ 51 . The preponderance of judicial opinion as deducted from the decisions referred to above appears to
be that a judgment or decree passed by a court under a summary procedure, where the Court has no
occasion to determine the truth or falsity of contentions raised or which may be raised and a judgment
will be entered in favour of the plaintiff merely because the defendant failed to appear or to apply for
leave to defend or if applied, the leave was refused is a decree or judgment which cannot be held to
have been given on merits.”

Page 30 of 61

42. Therefore, when the dispute before the Court is demonstrative of
the fact that the highly contested facts compel deeper scrutiny, disposal
of the case in summary jurisdiction would cause great prejudice to the
party seeking leave to defend. Not only in India, even under the law that
governs U.K. Courts, this principle is followed as per the practice and
procedure. Civil Procedure Rules CPR 24.2 specifies the grounds on
which summary judgment may be granted in the following manner:
"The court may give summary judgment against a claimant or
defendant on the whole of a claim
or on a particular issue if-
(a) it considers that-
(i) that claimant has no real prospect of succeeding on the claim
or issue; and
(ii) that defendant has no real prospect of successfully defending
the claim or issue; and
(b) there is no other reason why the case or issue should be
disposed of at a trial."

43. The principles to be adhered to in passing a summary judgment
25
have been crystallised in Easyair Ltd (t/a Openair) v Opal Telecom Ltd .
in the following manner:
“I. The court must consider whether the claimant has a “realistic”
26
as opposed to a “fanciful” prospect of success: Swain v Hillman

25
[2009] EWHC 339 (Ch)
26
[2001] 2 All ER 91
Page 31 of 61

II. A “realistic” claim is one that carries some degree of
conviction. This means a claim that is more than merely
27
arguable. ED & F Man Liquid Products v Patel
III. In reaching its conclusion the court must not conduct a “mini-
trial”, it is to enable cases, where there is no real prospect of
success either way, to be disposed of summarily: Swain v
Hillman.
IV. This does not mean that the court must take at face value and
without analysis everything that a claimant says in his
statements before the court. In some cases it may be clear that
there is no real substance in factual assertions made, particularly
if contradicted by contemporaneous documents: ED & F Man
Liquid Products v Patel at [10]
V. However, in reaching its conclusion, the court must take into
account not only the evidence actually placed before it on the
application for summary judgment, but also the evidence that
can reasonably be expected to be available at trial: Royal
28
Brompton Hospital NHS Trust v Hammond.
VI. Although a case may turn out at trial not to be really
complicated, it does not follow that it should be decided without
the fuller investigation into the facts at trial than is possible or
permissible on summary judgment. Thus the court should
hesitate about making a final decision without a trial, even where
there is no obvious conflict of fact at the time of the application,
where reasonable grounds exist for believing that a fuller
investigation into the facts of the case would add to or alter the
evidence available to a trial judge and so affect the outcome of
the case: Doncaster Pharmaceuticals Group Ltd v Bolton
29
Pharmaceutical Co.
VII. On the other hand it is not uncommon for an application
under Part 24 to give rise to a short point of law or construction
and, if the court is satisfied that it has before it all the evidence
necessary for the proper determination of the question and that
the parties have had an adequate opportunity to address it in
argument, it should grasp the nettle and decide it.
VIII. The reason is quite simple: if the respondent's case is bad
in law, he will in truth have no real prospect of succeeding on his
claim or successfully defending the claim against him, as the

27
[2003] EWCA Civ 472 at [8]
28
(No 5) [2001] EWCA Civ 550
29
100 Ltd [2007] FSR 63.
Page 32 of 61

case may be. Similarly, if the applicant's case is bad in law, the
sooner that is determined, the better.
IX. If it is possible to show by evidence that although material
in the form of documents or oral evidence that would put the
documents in another light is not currently before the court, such
material is likely to exist and can be expected to be available at
trial, it would be wrong to give summary judgment because there
would be a real, as opposed to a fanciful, prospect of success.”
44. In resisting the claim as well as in the application for leave to defend,
respondent relied upon three agreements. The first of these agreements
is stated to have been concluded at a meeting of the respondent’s Board
on 13.06.1997, prior to execution of the loan agreement, whereby it was
allegedly agreed that in the event the appellant was required to discharge
its obligations under the proposed guarantee issued in favour of the
lending bank, it would not seek recourse against the respondent or its
shareholders. The second agreement was asserted to have been reached
during September 2001, in the backdrop of disputes arising from alleged
breaches of the SPCA and TSSA and consequent monetary claims raised
by the respondent against the claimant; under this arrangement, the
appellant was to assume responsibility for the outstanding loan liability in
consideration of settlement of claims and continuation of the joint venture,
while the respondent and its shareholders would refrain from pursuing
certain claims against the appellant. The third agreement, relied upon by
the respondent, was described as an understanding or representation
made prior to commencement of proceedings, to the effect that the
Page 33 of 61

proceedings were being initiated merely for internal purposes of the
claimant and that, although a default judgment might be obtained, the
same would not be enforced against the respondent.
45. We are not inclined to examine whether the defences set by the
respondent are sufficient in all respects or not. For our purposes, it is
sufficient to draw a conclusion as to whether the said defences are
realistic and not fanciful . Even as per the principles followed by the English
Court while exercising jurisdiction to grant summary judgment, the Court
cannot convert the proceedings into a mini trial. More than anything, when
the assertions are supported by contemporaneous documents and there
is every possibility to expect supporting oral and documentary evidence
from both sides, the Court will refrain from proceeding with summary
judgment. A word of caution is also that where a matter does not initially
appear complex or where no immediate conflict of fact is evident, the
Court must not proceed with summary determination without trial.
46. Respondent’s defences involved proof of oral agreements between
the parties and require detailed examination on the basis of oral as well
as documentary evidence. There are contemporaneous documentary
material in the form of Balance Sheets and Minutes of Board Meetings,
30 31
documents which carry statutory significance under Sections 194 , 210 ,

30
Section 194: Minutes to be evidence.
31
Section 210: Annual accounts and balance-sheet.
Page 34 of 61

32 33
211 and 215 of the Companies Act, 1956. While we are not entering
into the merits of the defences, existence of such material documents with
presumptive value compels us to conclude that the respondent was
foreclosed without a full opportunity.
47. Further, the respondent contended that the Balance Sheet for the
financial year 2001-02 had been duly approved and signed by all
members of the Board of Directors, including Mr. Winfrid Schmidt, the
nominee Director representing the appellant. It was urged that Mr.
Schmidt had actively participated in the meetings of the Board and had
seconded the resolutions adopting the audited Balance Sheet and profit
and loss account. The entries contained in the Balance Sheet, particularly
those relating to the treatment of the ECB loan, recorded the company’s
position that no amount was payable to the appellant and that any demand
made by it lacked merit. Relevant portion of the Balance Sheet entry
pertaining to year 2001-02 is extracted as below:
'' 19. B (II) TREATMENT OF ECB LOAN REPAYMENT
The Company had taken a term loan (in the form of ECB) of 7
Million US Dollars from Citibank International Plc, London that
was guaranteed by Messer Griesheim GmbH (Messer). During
the year Messer paid the entire outstanding amount of ECB Loan
& Interest amounting to UCB 4. 78 million 4. 78 Million
(equivalent to Rs. 2236 lacs approx.) i.e. principal USD 4. 66
million and interest USD 0.12 Million to Citibank, Plc London.
Messer has made this payment pursuant to understanding with
the Company to partially compensate the company for the loss

32
Section 211: Form and contents of balance-sheet and profit and loss account.
33
Section 215: Authentication of balance-sheet and profit and loss account.
Page 35 of 61

suffered by the company due to Messer 's non cooperation in
implementing various projects and breach of certain clauses, of
Share Purchase and Cooperation Agreement dt. 12-05-1995
between the Company and Messer.
As per Mutual understanding with Messer, the Company has
adjusted Rs. 58 lacs in the Interest Expenses and Rs. 2078 lacs
towards loss suffered by the Company in the value of its
investment in Capital Work in Progress and balance amount of
Rs. 100 lacs has been adjusted towards the Company's claim.
of Rs. 50,000 lacs against Messer for the loss suffered by the
Company on account of breach of certain clauses of Share
Purchase and Cooperation Agreement dt. 12.05.1995.”
(emphasis supplied)
48. Further, para-2 provided that:
"CONTINGENT LIABILITIES NOT PROVIDED FOR:
"(a) Guarantees given and letters of credit issued by bank on
behalf of company Rs.287.94 lacs (Previous year 163.36 lacs)
(b) Contrary to the understanding with the Company, Messer
Greisheim, GmbH, had made a demand on the company to
make payment of the amount of USD 4.78 Million (equivalent to
Rs. 2236 Lacs) being the amount of ECB Loan paid by Messer
to Citi Bank. The Company is of the view that contentions of
Messer has no merits. "
49. The Minutes of the Meetings dated 27.05.2002 and 31.01.2003
reveal that the Balance Sheets and accounts were adopted unanimously,
with the participation and signatures of the nominee Director of the
appellant. In the Minutes of Meeting dated 27.05.2002, it has been noted
as under:-
"1. ADOPTION OF THE AUDITED BALANCE SHEET AS AT
31ST DEC. 2001 AND PROFIT & LOSS ACCOUNT FOR THE
ENDED ON THAT DATE AND THE REPORTS OF THE
DIRECTORS AND AUDITORS THEREON
The Chairman stated that the Audited Balance Sheet of the
Company as at 31st December,2001 and Profit & Loss Account
Page 36 of 61

for the year ended on that date together with schedules,
annexures and attachments having already been circulated and
lying with the Members for quite some time. The Chairman read
the Auditor's Report. However, annexure to the Auditor’s Report
was taken as read with the permission of the Members present.
After discussions on the Accounts the following Resolution was
proposed as an ordinary Resolution by Mr. S. C. Goyal and
seconded by Mr. Winfrid Schmidt.
RESOLVED THAT Audited Balance Sheet as at 31 December,
2001 and Profit &Loss Account for the year ended on that date
and the Reports of the Directors and Auditors thereon as laid
before the Members of this Meeting be and are hereby adopted."
The Chairman put the resolution on vote by show of hands,
which was carried unanimously.”

50. Similarly, Minutes of Meeting dated 31.01.2003 recorded as under:
'' (iii) RESOLVED FURTHER that the Draft Balance Sheet as at
31st December, 2002 and profit & loss account of the Company
together with accounting policies, schedules and notes thereon,
for the year ended 31st December, 2002 together with relevant
attachments having placed before the Board, be and are hereby
approved and the same be authenticated in terms of section 215
of the Companies Act, 1956 by at least two Directors, one of
whom shall be Managing Director along with Company
Secretary of the Company and the same may be submitted to
the Statutory Auditors of the Company for their Reports thereon.
Thereafter, Balance Sheet as at 31.12.2002 and Profit& Loss
Account for the year ending 31.12.2002 were signed by Mr. S.C.
Goyal, Managing Director, Mr Winfrid Schmidt and Mr. G.K.
Balaya, Directors of the company along with Mr. N.K. Bagri,
Company Secretary of the company and then these were
forwarded to the Statutory Auditors of the company for their
report thereon, who were present in the office ...”

51. Although the English Court had referred to the Balance Sheet and
the Minutes of Meetings, certain other correspondence, including the
respondent’s e-mail dated 20.02.2003 disputing the appellant’s
Page 37 of 61

subsequent objections raised vide communication dated 19.02.2003,
does not appear to have formed part of the record of summary
adjudication. The Division Bench of the High Court has taken note of the
said e-mail dated 20.02.2003 and arrived at the conclusion that reliance
on such evidence could have made a material difference to the outcome.
The attempt on the part of the appellant to dispute the entries in the
Balance Sheet, after having participated in and assented to their adoption,
could not have been readily accepted in summary adjudication,
particularly when statutory presumptions and material communications
had not undergone the required test of proof in a full-fledged trial.
52. In our considered view, triable issues were disclosed. The
respondent sought leave to defend, adduced contemporaneous
documents in support of its defence. It was incumbent upon the English
Court to refrain from disposing of the case by way of summary judgment.
The grant of summary judgment resulted in premature adjudication of
disputed questions of fact and effectively denied the respondent a
meaningful opportunity to establish its case through oral evidence and
cross-examination.
53. Having considered the matter in detail, we are of the opinion that the
procedure adopted in rendering of the foreign judgment sought to be
enforced is not consistent with the well-established principles of law.
Page 38 of 61

Consequently, the summary disposal of the claim in the presence of triable
issues cannot be sustained, and we are constrained to hold that the
foreign judgment, falls foul of the requirement of Section 13(b) CPC.
Re: Issue II. Whether the judgment is unenforceable in view of the
conditions imposed by RBI in exercise of the statutory power under
FERA:
54. In view of our decision on the first issue, it is not necessary for us to
delve into the present issue relating to bar of enforceability of the foreign
decree in view of the RBI communication dated 03.09.1997. However, as
substantial arguments were advanced on this issue, we will proceed to
give our opinion even on this issue.
55. There is no dispute about the fact that the mandatory requirement
of obtaining the prior permission of Government of India as well as that of
the RBI was secured by the parties before availing external borrowing.
However, the question relates to the consequence of the conditions
imposed by RBI while granting permission by its letter dated 03.09.1997.
In other words, whether the condition that “ In case of invocation of
guarantee no liability whatsoever will extend to the Indian company ” would
operate as an absolute bar to enforcement for all times to come as
contended by Mr. Chidambaram.
Page 39 of 61

56. In light of the competing submissions, the question that arises for
consideration is twofold: first, the true import and legal effect of the RBI
condition dated 03.09.1997 within the framework of the then prevailing
foreign exchange law; and second, whether enforcement of the foreign
decree, in disregard of such condition, would attract the bar contained in
Sections 13(c) and 13(f) of the CPC or is enabled under Section 47 of the
FERA Act, 1973.
57. The purpose and object of the FERA Act, 1973 is explained in LIC
34
of India v. Escorts Ltd. . The position as it existed when the conditional
permission was granted, when the Act was in operation can well be
appreciated in the following background;
“4. The present state of Indian economy which has to operate
under the existing world economic system is such that India
needs foreign exchange and, lots of it, to meet the demands of
its developmental activities. It has become necessary to earn,
conserve and build up a reservoir of foreign exchange. So the
Parliament and the executive Government have been taking
steps, from time to time, to regulate, to conserve and improve
the foreign exchange resources of the country and the proper
utilisation thereof in the interests of the economic development
of the country. The Foreign Exchange Regulation Act, 1973 was
enacted for that purpose.

63….. The object of the Foreign Exchange Regulation Act, as
already explained by us, undoubtedly, is to earn, conserve,
regulate and store foreign exchange. The entire scheme and
design of the Act is directed towards that end. Originally the
Foreign Exchange Regulation Act, 1947 was enacted as a
temporary measure, but it was placed permanently on the
Statute Book by the Amendment Act of 1957. The Statement of

34
(1986) 1 SCC 264.
Page 40 of 61

Objects and Reasons of the 1957 Amendment Act expressly
stated, “India still continues to be short of foreign exchange and
it is necessary to ensure that our foreign exchange resources
are conserved in the national interest”. In 1973, the old Act was
repealed and replaced by the Foreign Exchange Regulation Act,
1973, the long title of which reads: “An Act to consolidate and
amend the law regulating certain payments, dealings in foreign
exchange and securities, transactions indirectly affecting foreign
exchange and the import and export of currency and bullion, for
the conservation of foreign exchange resources of the country
and the proper utilisation thereof in the interest of the economic
development of the country.” We have already referred to
Section 76 which emphasises that every permission or licence
granted by the Central Government or the Reserve Bank of India
should be animated by a desire to conserve the foreign
exchange resources of the country. The Foreign Exchange
Regulation Act is, therefore, clearly a statute enacted in the
national economic interest….”

58. It is in this context that we must exercise certain provisions of FERA.
“Section 8 - Restrictions on dealing in foreign exchange
(1) Except with the previous general or special permission of the
Reserve Bank, no person other than an authorised dealer
shall in India, and no person resident in India other than an
authorised dealer shall outside India, purchase or otherwise
acquire or borrow from, or sell, or otherwise transfer or lend
to or exchange with, any person not being an authorised
dealer, any foreign exchange: Provided that nothing in this
sub-section shall apply to any purchase or sale of foreign
currency effected in India between any person and a money-
changer.
Explanation- For the purposes of this sub-section, a person,
who deposits foreign exchange with another person or opens
an account in foreign exchange with another person, shall be
deemed to lend foreign exchange to such other person.

(2) Except with the previous general or special permission of the
Reserve Bank, no person, whether an authorised dealer or a
money-changer or otherwise, shall enter into any transaction
which provides for the conversion of Indian currency into
foreign currency or foreign currency into Indian currency at
rates of exchange other than the rates for the time being
authorised by the Reserve Bank.
Page 41 of 61

(3) Where any foreign exchange is acquired by any person,
other than an authorised dealer or a money-changer, for any
particular purpose, or where any person has been permitted
conditionally to acquire foreign exchange, the said person
shall not use the foreign exchange so acquired otherwise than
for that purpose or, as the case may be, fail to comply with
any condition to which the permission granted to him is
subject, and where any foreign exchange so acquired cannot
be so used or the conditions cannot be complied with the said
person shall, within a period of thirty days from the date on
which he comes to know that such foreign exchange cannot
be so used or the conditions cannot be complied with, sell the
foreign exchange to an authorised dealer or to a money-
changer.

(4) For the avoidance of doubt, it is hereby declared that where
a person acquires foreign exchange for sending or bringing
into India any goods but sends or brings no such goods or
does not send or bring goods of a value representing the
foreign exchange acquired, within a reasonable time or sends
or brings any goods of a kind, quality or quantity different from
that specified by him at the time of acquisition of the foreign
exchange, such person shall, unless the contrary is proved,
be presumed not to have been able to use the foreign
exchange for the purpose for which he acquired it or, as the
case may be, to have used the foreign exchange so acquired
otherwise than for the purposes for which it was acquired.

(5) Nothing in this section shall be deemed to prevent a person
from buying from any post office, in accordance with any law
or rules made thereunder for the time being in force, any
foreign exchange in the form of postal orders or money
orders.”

59. Section 8 restricts dealings in foreign exchange and mandates that,
except with the previous general or special permission of the RBI no
person other than an authorised dealer shall purchase, acquire, borrow,
sell, transfer, lend or exchange foreign exchange with any person who is
not an authorised dealer. The section thus establishes a controlled regime
Page 42 of 61

whereby acquisition, use, and disposal of foreign exchange remain
subject to regulatory supervision and purpose-specific compliance.

Economic Affairs vide communication dated 02.04.1997. The relevant
portion of said communication is as follows:
“Dear Sirs,
With reference to your letter no. GMG/FIN/6.21, dated 26-12-
1996, on the subject cited above, I am directed to convey the
approval of the Government of India, Ministry of Finance,
Page 43 of 61

Department of Economic Affairs, for your obtaining a foreign
currency loan from M/s. Citibank International Plc, London, for
financing the import of capital goods, on the following terms and
conditions: -
……..
2. No other charges in foreign currency or Indian Rupee other
than those specifically authorized in terms of this sanction will be
permitted for payment.
4. You are requested to obtain the approval of the Reserve Bank
of India, Exchange Control Department, through your banker
under FERA, 1973 in order to satisfy the Reserve Bank that the
terms of the Government approval are complied with and that no
additional foreign exchange liability, either express or implied, is
being assumed under the arrangements.
7. The Reserve Bank of India, would be advised to allow you to
draw the loan and effect the advance payment/down payment
only after your agreement with the lender is taken on record by
this Department. You are, therefore, requested to make available
to this Department one executed copy of the loan agreement,
immediately after it is entered into, along with the enclosed
proforma duly filled (in duplicate), with reference to this sanction
letter. Please note that if the said executed copy of the
agreement along with proforma is not made available to this
Department within three months from the date of issue of this
letter, the approval for External Commercial Borrowings
contained herein shall automatically lapse unless specifically
extended by this Department.”
(emphasis supplied)

62. Thereafter, respondent applied to RBI vide application dated
24.04.1997 seeking its approval for the purpose of availing loan. RBI
granted ‘in-principle’ approval to respondent on 28.05.1997 and stated
that respondent shall approach RBI for final approval after the loan
agreement is taken on record by the Government of India.
Page 44 of 61

63. Accordingly, Government of India took the loan agreement on
record on 24.07.1997 and noted that;
“Dear Sirs,
With reference to your letter no. GMG/FIN/6.21, dated 30-06-
1997, on the subject cited above, I am directed to convey the
approval of the Government of India, Ministry of Finance,
Department of Economic Affairs, to include item no. (h) and (i)
under para (1) of this Department's sanction letter of even no.
dated 01-04-1997 (Sanction No. 765/23), as under: -
(h) Commitment fee: 0.2% p.a. on the undrawn portion of the
loan, payable in arrears.
(i) Transfer fee: USD 750/-
2. With reference to para 6 of the above mentioned letter, you.
have furnished to this Department an executed copy of the loan
agreement for an amount of USD 7 Million which has been taken
on record by this Department. While the terms and conditions of
our above sanction letter appear to have been correctly
incorporated in the loan agreement, any provisions of the loan
agreement, which are found to be at variance with the provisions
of the said sanction letter shall be void and be not binding on the
Government of India or Reserve Bank of India.”
(emphasis supplied)

64. Pursuant to the same, RBI granted final approval to the loan on
12.08.1997 appending various regulatory conditions upon approval of the
loan facility. Relevant portion of RBI’s final approval, as is necessary for
our purposes, is reproduced below:
“Dear Sir,
Midterm/Longterm Foreign Exchange Loan/Credit Final
Approval-Regn No. 40958
Page 45 of 61

Kindly refer to your application dated 30.07.97 made in Form 83.
2. We are giving herebelow our Final approval for raising Foreign
Currency Loan/Credit of US$ 7 Million from Mis Citibank. Intl.
Plc, London subject to the following terms and conditions.
…..

7. As regard issue of guarantee we shall be advising you
separately in due course.”
(emphasis supplied)

65. RBI, however, left the issue of guarantee open by stating that, “ as
regards issue of guarantee we shall be advising you separately in due
course. ” Subsequently, on 20.08.1997, respondent wrote a letter to RBI
informing that the lender bank is not allowing to withdraw the loan because
the issue of guarantee has not been decided and therefore requested for
grant of clearance.
66. Accordingly, RBI on 03.09.1997 accorded permission for issuance
of guarantee by appellant for securing the loan subject to two conditions:
“ i) There is no outgo of foreign exchange by way of any fee,
direct or indirect, for the proposed guarantee.
ii) In case of invocation of guarantee, no liability whatsoever will
extend to the Indian Company.”
(emphasis supplied)
67. Thus, the ultimate analysis falls on the interpretation and
consequence of said condition. However, before we delve into the true
import of the RBI condition, we must first refer to how the same have been
dealt and considered by Courts below.
Page 46 of 61

68. Findings of the English Court on RBI communication dated
03.09.1997 : Having examined the statutory framework within which letter
dated 03.09.1997 has been issued, it is necessary to appreciate the
judgment rendered by the English Court. While passing the summary
judgment dated 07.02.2006, English Court had specifically considered the
respondent’s reliance on the RBI communication dated 03.09.1997. It was
observed that;
“19. The RBI was provided with a copy of the loan agreement.
The conditions were, on the evidence of Indian law adduced on
behalf of Messer., standard provisions intended to ensure that if
the guarantor paid the lender, the borrower would have no
liability to the lender. That would make sense. It is difficult to see
why the RBI, having permitted Goyal to use foreign exchange to
meet its liabilities under the loan agreement, should be
concerned that the same liabilities were owed to Messer,
provided they ceased to be owed to Citibank. In any event, the
incidence of Indian foreign exchange law would, as Mr Foxton
submitted, only invalidate a contractual obligation if Indian was
the proper law of the contract or the law of the place for its
performance. Neither apply.”

69. Before the Single Judge, when
Findings of the Single Judge :
respondent agitated its objections with regard to RBI conditions, the same
were dispelled by observing as under;
“44. As regards the requirement of prior permission under the
FERA, it must be noticed that FERA is no longer in existence
and has been substituted by the Foreign Exchange Management
Act, 1999 (‘FEMA’). The current circular of the RBI which is
relevant is Circular No. 12/2013-14 dated 1st July 2013. The
relevant portion of the Circular reads as under:
Page 47 of 61

“The Reserve Bank vide its Notification No. FEMA.29/RB2000
dated September 26, 2000 has granted general permission to a
resident, being a principal debtor to make payment to a person
resident outside India, who has met the liability under a
guarantee. Accordingly, in cases where the liability is met by the
non-resident out of funds remitted to India or by debit to his
FCNR(B)/NRE account, the repayment may be made by credit
to the FCNR(B)/NRE/NRO account of the guarantor provided,
the amount remitted/credited shall not exceed the rupee
equivalent of the amount paid by the non-resident guarantor
against the invoked guarantee.”
45. In any event, as explained in Renusagar even an ex post
facto permission of the RBI could be obtained by the DH if it
seeks to repatriate the funds deposited by the JD in the
execution proceedings. It would be for the DH to comply with all
the requirements of the RBI at that stage. Consequently, this
objection is without merit.
50. As regards the objection that the High Court at England
ignored the provisions of FERA, the DH is right in pointing out
that the permission could be obtained even at a subsequent
stage. Under a Master Circular dated 1st July 2013, the RBI has
granted general permission to a principal debtor to make a
payment to a person residing outside India, who has made the
liability under guarantee. It has been held in Silver Shield
Construction Co. Ltd. v. Recondo Ltd. 1994 (15 )CLA 92 (Bom)
and Dhanraj Mal Gobindram v. M/s. Shamji Kalidas and Co.
1961 (3) SCR 1020 that the permission of RBI under Section
47(3) (b) of FERA need not be obtained prior to filing of the
execution petition.”

70. The Division Bench however took
Findings of the Division Bench :
a contrary view and observed that;
“52……. We note that in the impugned judgment and decree
passed by the English Court, it has been observed that the
condition imposed by the RBI that ‘if the guarantor paid to the
lender, the borrower would have no liability to the lender’, makes
sense. However, it further questioned as to why RBI had granted
permission to appellant/JD to use foreign exchange to meet its
liabilities under the loan agreement and recorded that the
incidence of Foreign Exchange Law would invalidate the
Page 48 of 61

contractual obligation as a submission of learned counsel - Mr.
Foxton, who represented respondent/DH. On this aspect we find
that while observing so, the UK Court did not consider Clause -
14.1 of the loan agreement, which reads as under:-
“Maintenance of Legal Validity: Each of the Obligors shall
obtain, comply with the terms of and do all that is necessary
to maintain in full force and effect ail authorizations,
approvals, licences and consents required in or by the laws
and regulations of its jurisdiction of incorporation to enable
it lawfully to enter into and perform its obligations under this
agreement, and to ensure the legally, validity, enforceability
or admissibility in evidence in its jurisdiction of incorporation
of this Agreement.”
53. The above apparently shows the respondent/DH was
bounden to take permission from RBI for implementation of the
Loan Agreement and the RBI, while granting the permission, had
put the twin conditions.
54. ……….On this aspect we find that the present case does not
come within the ambit of Section 47(3)(b) of FERA. These
provisions are applicable in cases where permission is required
to be obtained for the first time from RBI after final decree is
passed so that foreign currency can be sent abroad. The learned
Single Judge on this issue has relied upon Supreme Court’s
decision in Renusagar Power Co. Ltd. Vs. General Electric Co.
1994 Supp (1) SCC 644 to hold that ex post facto permission
from RBI could be obtained by the DH for repatriating the funds
deposited by the appellant/JD. Upon going through decision in
Renusagar Power Co. Ltd. Vs. General Electric Co. and applying
it to the facts of the present case, we find that no doubt in view
of said decision ex post facto permission can be obtained from
the RBI to remit the funds, however, when the decree itself is
found to be vitiated, being against the prescribed procedure of
law recognized in India, the occasion for obtaining ex post facto
permission from RBI by the decree holder in respect of awarded
amount, does not arise at all. We have already observed that the
decree passed by the Court in UK is without any merit and
abrogative. Also, in the present case the respondent/DH was the
Guarantor to the lender located in a foreign country. We also find
that once a conditional permission has been granted by the RBI,
any claim beyond the said conditions is contrary to law.”
(emphasis supplied)

Page 49 of 61

71. True import of Section 47, FERA and RBI conditions dated
03.09.1997 : Matters relating to performance of contracts, relating to
external commercial borrowings in the context of the Act is laid down in
Section 47 of FERA. As resolution of this issue turns on the true and
correct interpretation of Section 47, the same is reproduced herein for
ready reference;
“47. Contracts in evasion of the Act .-(1) No person shall enter
into any contract or agreement which would directly or indirectly
evade or avoid in any way the operation of any provision of this
Act or of any rule, direction or order made thereunder.
(2) Any provision of, or having effect under, this Act that a thing
shall not be done without the permission of the Central
Government or the Reserve Bank, shall not render invalid any
agreement by any person to do that thing, if it is a term of the
agreement that, that thing shall not be done unless permission
is granted by the Central Government or the Reserve Bank, as
the case may be; and it shall be an implied term of every contract
governed by the law of any part of India that anything agreed to
be done by any term of that contract which is prohibited to be
done by or under any of the provisions of this Act except with the
permission of the Central Government or the Reserve Bank,
shall not be done unless such permission is granted.
(3) Neither the provisions of this Act nor any term (whether
express or implied) contained in any contract that anything for
which the permission of the Central Government or the Reserve
Bank is required by the said provisions shall not be done without
that permission, shall prevent legal proceedings being brought
in India to recover any sum which, apart from the said provisions
and any such term, would be due, whether as debt, damages or
otherwise, but-
(a) the said provisions shall apply to sums required to be paid by
any judgment or order of any Court as they apply in relation to
other sums;
(b) no steps shall be taken for the purpose of enforcing any
judgment or order for the payment of any sum to which the said
Page 50 of 61

provisions apply except as respects so much thereof as the
Central Government or the Reserve Bank, as the case may be,
may permit to be paid; and
(c) for the purpose of considering whether or not to grant such
permission, the Central Government or the Reserve Bank, as the
case may be, may require the person entitled to the benefit of
the judgment or order and the debtor under the judgment or
order, to produce such documents and to give such information
as may be specified in the requisition.
(4) Notwithstanding anything contained in the Negotiable
Instruments Act, 1881, neither the provisions of this Act or of any
rule, direction or order made thereunder, nor any condition,
whether expressed or to be implied having regard to those
provisions, that any payment shall not be made without
permission under this Act, shall be deemed to prevent any
instrument being a bill of exchange or promissory note.”
(emphasis supplied)
72. Sub-section (3) of Section 47 clarified that neither the provisions of
FERA nor contractual stipulations requiring prior permission of the Central
Government or the Reserve Bank shall prevent legal proceedings from
being instituted in India to recover sums otherwise due. However, the
latter part of the provision engrafts an express limitation in mandatory
terms, stipulating that “ no steps shall be taken for the purpose of enforcing
any judgment or order… except… as the Reserve Bank… may permit .”
73. The statutory distinction between the institution of proceedings and
the enforcement of a judgment assumes considerable significance. While
the legislation expressly permitted adjudicatory proceedings to determine
liability, it has simultaneously restricted execution of such a determination
in the absence of regulatory approval. The use of the expression “no steps
Page 51 of 61

shall be taken” manifests an intention to impose a condition precedent to
enforcement. The scheme of the provision thus makes the legislative
position clear that there is a conscious distinction between the initiation of
proceedings and the stage of enforceability. The underlying purpose is to
ensure that access to a judicial remedy is not foreclosed and that liability
may be determined by a competent court, while at the same time
preserving the authority of the Central Government and the RBI to decide
whether, and to what extent, such adjudicated liability may ultimately be
enforced. The power to grant or refuse permission, therefore, continues
to vest in the regulatory authorities, and the enforceability of any decree
remains subject to the grant of such permission.
74. The stage at which the RBI permission is required : The real
controversy, therefore, narrows down to the stage at which permission of
the RBI is required, if at all, for the purpose of enforcement of the foreign
decree. In other words, whether it must be before initiation of the
enforcement proceedings or even thereafter.
75. Mr. Chidambaram strongly relied on the decision of this Court in
35
Asha John Divianathan v. Vikram Malhotra & Ors. to contend that
Section 8 specifically uses the expression “prior permission” and that must

35
(2021) 19 SCC 629.
Page 52 of 61

operate as a clear bar. He would contend that under similar circumstances
this Court has held that transfer of property without permission under
Section 31 is prohibited under law. On careful scrutiny, we notice that the
transaction in Asha John (supra) was without any prior permission
whatsoever, and therefore the Court was compelled to conclude that the
transaction is prohibited. In so far as the present case is concerned, a
prior permission was sought and RBI has granted the prior permission.
Under these circumstances, we are of the opinion that principles laid down
in Asha John (supra) have no application in facts and circumstances of
the present case.
36
76. In Renusagar Power Co. Ltd. v. General Electric Co. the Court
had to deal with a situation where the permission was in fact refused by
the Central Government. This Court considered the matter and directed
as under:
“84. Shri Venugopal has urged that Section 47(3) cannot be
applied in the present case because it postulates a situation
where permission of the Central Government has not been
sought and that in the present case permission was sought but
was refused earlier. In our view the earlier refusal by the
Government to give its approval to the rescheduling of payment
of instalments does not in any way preclude the Government of
India from considering the matter in the light of the subsequent
developments and it cannot be said that merely because the
Government of India had refused to give its approval to
rescheduling of payment of instalments it would not grant
permission under Section 47(3) of FERA to the enforcement of

36
1994 Supp (1) SCC 644.
Page 53 of 61

the judgment that may be passed in these proceedings. It has
also been urged that Section 47(3) of FERA is applicable where
the legal proceedings are brought in India to recover a sum
which is ‘due’, i.e., as liquidated sum presently owing and the
said provision would not apply to an obligation to pay on a future
date. We do not find any support for this submission from the
language of Section 47(3) of FERA wherein the words used are
“to recover any sum which, apart from the said provisions and
any such term, would be due, whether as debt, damages or
otherwise”. The words “would be” which precede the word “due”
indicate that the quantum of the amount has to be fixed in the
legal proceedings and that it need not be a predetermined
amount. Moreover in the present case, we are concerned with
the proceedings for the enforcement of the award wherein the
amount due has already been determined by the Arbitral
Tribunal. We are, therefore, unable to hold that the enforcement
of the award would involve violation of any of the provisions of
FERA and for that reason it would be contrary to public policy of
India so as to render the award unenforceable in view of Section
7(1)(b)(ii) of the Act.”
77. The reliance placed on the decisions in LIC of India (supra) and
Renusagar (supra) does not materially advance the contention urged,
having regard to the distinct statutory setting and the stage at which the
present controversy arises. In LIC of India (supra), the Constitution Bench
was concerned with the interpretation of Section 29(1) of FERA, where
the expression used was merely “permission” without the qualifying word
“previous”, and the issue was whether such permission could be granted
ex post facto for validating a transaction. The ratio of that decision turned
on the textual distinction between provisions expressly requiring “previous
permission” and those employing the word “permission” simpliciter. The
present case, however, arises in the context of Section 47(3)(b), which
operates at a materially different stage, namely, the enforcement of a
Page 54 of 61

judgment, and which, in express and prohibitory terms, mandates that “ no
steps shall be taken for the purpose of enforcing any judgment or order…
except as the Reserve Bank… may permit. ” The language employed is
negative thereby creating a statutory embargo on enforcement in the
absence of permission.
78. Likewise, in Renusagar (supra) the Court was concerned with the
permissibility of enforcing a foreign arbitral award and whether the earlier
refusal of governmental approval would foreclose consideration of
permission at a subsequent stage. The decision proceeded on the footing
that the competent authority retained the discretion to consider the grant
of permission in light of subsequent developments and did not lay down
that enforcement could proceed in the absence of permission as
contemplated under Section 47(3)(b). On the contrary, the reasoning in
Renusagar (supra) implicitly affirms the necessity of such permission at
the stage of enforcement, while clarifying that refusal at an earlier point
does not render the statutory power to grant permission otiose. The
decision, therefore, cannot be read as dispensing with the statutory
requirement of prior permission before enforcement, nor as supporting the
contention that execution may proceed independent of regulatory
sanction.
Page 55 of 61

79. On the other hand, Bombay High Court had to deal with situation
similar to facts of the present case, though the issue arose under Section
26(6). The High Court, in Algemene Bank Nederland NV v. Satish Dayalal
37
Choksi took the view that;
“32…..Under section 47(3), therefore, a suit for the
enforcement of a guarantee for which permission of the Reserve
Bank/Central Government would have been required under
Section 26(6) can be brought in India. Filing of a suit, therefore,
on such a guarantee cannot be said to be contrary to any law in
India because S. 47 sub-sec. (3) expressly permits such legal
proceedings in India. Such proceedings abroad cannot be said
to be violative of any law in India. However, no steps can be
taken for the purpose of enforcing any judgment or order for the
payment of any sum under such a guarantee except in respect
of so much thereof as the Central Government or the Reserve
Bank may permit to be paid. With the result that before a foreign
decree passed on such a guarantee can be executed in India,
permission of the Reserve Bank or the Central Government for
realising such sum is necessary.
33. Section 47(3)(b) says, “No steps shall be taken for the
purpose of enforcing any judgment or order for the payment of
any sum to which the said provisions apply except as respects
so much thereof as the Central Government or the Reserve Bank
may permit to be paid”. An application under Order 21 Rule 22
is certainly a step for the purpose of enforcing a judgment. Under
Order 21 Rule 11 every application for execution of a decree
shall be in writing signed and verified by the applicant and shall
contain, inter alia, various particulars including the mode in which
the assistance of the court is required. Under order 21 Rule 22,
inter alia, where an application for execution of a foreign decree
is filed under the provisions of sec. 44A, leave is necessary.
Therefore, before any leave can be obtained under Order 21
Rule 22, it is necessary to make an application under O. 21 R.
11. These are, therefore, clearly proceedings for the purpose of
enforcing a foreign judgment. Before such steps can be taken
permission of the Reserve Bank or the Central Government, as
the case may be, is necessary under section 47(3)(b).

37
1989 SCC OnLine Bom 282.
Page 56 of 61

34. It was contended by Mr. Tulzapurkar, learned Counsel
for the plaintiff-Bank, that such permission can be obtained after
leave is granted under Order 21 Rule 22 but before the actual
execution is levied. This contention cannot be accepted in view
of the express provisions of section 47(3)(b). Section 47(3)(b)
clearly prohibits any step being taken for the purpose of
enforcement without the permission of the Reserve Bank or the
Central Government. It does not say that actual execution shall
not be levied without such permission. In fact, once leave is
granted under O. 21 R. 22, nothing further is required to be done
and the plaintiff Bank can proceed with execution. A prior
permission of the Reserve Bank or the Central Government, as
the case may be, is therefore required before taking any step for
the enforcement of the decree, including an application under O.
21 R. 22. Such permission has not been obtained by the plaintiff-
Bank. Without such permission it cannot proceed.”
80. The view taken by the Bombay High Court in Algemene Bank
(supra) is more directly referable to the question arising in the present
case, as it construed Section 47(3)(b) in the context of execution
proceedings relating to a foreign decree. The High Court held that the
expression “ no steps shall be taken for the purpose of enforcing any
judgment ” is wide enough to include applications under Order XXI of CPC.
On that basis, it was held that permission of RBI or the Central
Government must be obtained before initiating such steps in execution.
This construction emphasises the mandatory nature of the restriction
operating at the stage of execution, while at the same time recognising
the distinction drawn by the statute between the institution of proceedings
on the one hand and the taking of steps in enforcement on the other. The
decision in Algemene Bank (supra), therefore, lends support to the view
that although adjudication of liability is not interdicted, the execution
Page 57 of 61

process itself cannot be set in motion in the absence of the requisite
regulatory permission.
81. Having considered the matter in detail, we are of the opinion that
there is no prohibition for initiation of proceedings and for a determination
as regards the liability. However, after obtaining a declaration, for its
implementation, obtaining permission from RBI is sine qua non . In other
words, without RBI approval, it is not possible to take steps for
enforcement of a decree.
82. The elasticity of obtaining ex-post facto permission as suggested in
LIC of India and Renusagar (supra) will have practical problem. While
these judgments do not overrule the necessity to obtain permission of RBI
as a mandatory requirement, they have suggested a way out by
provisioning ex-post facto permission. There is a practical problem in this
approach in the sense that if the Indian court affirms executability of the
foreign decree and thereafter the Central Government or the RBI refuses
to grant permission, the whole exercise would be redundant. On the other
hand, if the parties are required to take RBI permission first and then
approach the court for execution, two consequences would follow; (i) If
RBI refuses permission, matter ends there - further enforcement would
not arise. Maybe the party could challenge the legality and validity of the
order refusing permission in writ proceedings, that’s a different matter and
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(ii) On the other hand, if permission is granted, the party will approach the
court for execution then in which case, the only question remaining for
court to consider is compliance of Section 13 CPC coupled with Section
47(3)(b), FERA.
83. In view of the above discussion, we have no hesitation in rejecting
Mr. Chidambaram’s submission that there is absolute and total bar of
enforcement of a decree by virtue of the conditional permission in its letter
dated 03.09.1997. This submission is therefore rejected. In the normal
course, a party obtaining foreign judgment can seek enforcement in India
if such a judgment qualifies the test laid down in Section 13 of CPC. The
Central Government/RBI can exercise its regulatory power under Section
47(3) of FERA and grant its approval before any further steps are taken
for implementing the judgment.
84. Returning to the facts of the present case, in view of our finding on
issue no. 1, that the foreign judgment is violative of requirements of
Section 13 CPC, our findings on issue no. 2 will have no consequence.
We have decided issue no. 2 in view of the fact that detailed submissions
were made by both the parties. We also considered it necessary to clarify
the position in view of the text of Section 47 of FERA coupled with its
interpretation by Bombay High Court.
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85. At this juncture, it would also be apposite to clarify that the
objections raised by the respondent do not extend to all the grounds
enumerated under Section 13 of CPC. Upon careful consideration, we find
that the English Court possessed jurisdiction over the parties and the
subject matter. The Loan Agreement executed between the parties
expressly provided that the contract would be governed by English law
and that disputes arising therefrom would be subject to the jurisdiction of
the English Courts. A reading of clause 12.5, 31.1 and 31.2 leads to
inescapable conclusion that English Court was a competent court.
Likewise, no case of fraud within the meaning of Section 13(e) CPC has
been made out. To that extent, the judgment of the English Court cannot
be faulted under clauses (a), and (e) of Section 13 CPC.
86. However, for the reasons already recorded, we are of the
considered opinion that the foreign judgment suffers from fundamental
infirmities under clauses (b), (c), (d) and (f) of Section 13 CPC. The
adjudication by way of summary judgment in the presence of bona fide
triable issues renders the judgment one not delivered on merits within the
meaning of Section 13(b). Further, the failure of the English Court to give
due effect to statutory permissions and conditions imposed under Indian
foreign exchange law attracts the mischief of Section 13(c). Despite triable
issues, respondent was not granted leave to defend which stands in teeth
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of clause (d) of Section 13. The enforcement of liability contrary to binding
statutory conditions also brings the decree within the prohibition contained
in Section 13(f), being opposed to the law in force in India. Accordingly,
while the foreign judgment satisfies certain procedural requirements, it
nonetheless fails the substantive tests mandated under clauses (b), (c),
(d) and (f) of Section 13 CPC.

VIII. Conclusions:
87 . For the reasons stated above, which are distinct from those that are
adopted by the Division Bench of High Court, we are of opinion that the
judgment of English Court is not enforceable in terms of Section 44A of
CPC since it falls foul of exceptions enumerated in Section 13 of CPC, as
already noted above.
88. The appeal therefore fails and is dismissed. There shall be no order
as to costs.
………………………………....J.
[ ]
PAMIDIGHANTAM SRI NARASIMHA
………………………………....J.
[ ]
ALOK ARADHE
NEW DELHI;
APRIL 21, 2026.

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