Safeguards for enforcement of a foreign judgement

Safeguards for enforcement of a foreign judgement

In an important decision rendered by the Hon’ble Supreme Court of India in the case of Messer Griesheim GmbH (now Air Liquide Deutschland GmbH) v. Goyal MG Gases Private Limited (2026 INSC 401), the Supreme Court laid emphasis on the requirement of permitting a respondent to lead detailed evidence even before a Foreign Court for enabling the resultant decree to pass the muster of Section 13 of the Code of Civil Procedure, 1908 (CPC).

In the course of its Judgement the Hon’ble Supreme Court also commented on the permissibility of executing a Foreign Decree when such execution is subject to regulatory approval.

Background

The Supreme Court adjudicated a civil appeal filed by a Foreign Decree holder in whose favour the High Court of Justice, Queens Bench Division, (English Court) passed a summary Judgement, directing a payment of USD 5,824,564.74 and Euro 31,364.74 together with interest at 8% per annum and costs of 90,000 Pounds against the Respondent. Curiously the Judgement was a summary Judgement after affording an opportunity of hearing rather than a default Judgement, which is usually passed owing to the absence of the Respondent in appearing or tendering a reply. 

The factual transaction between the parties related to invocation of subrogation rights by the Appellant pursuant to honouring a guarantee in favour of a lender bank on behalf of the Respondent. However, the guarantee document itself was subject to a condition enforced by the Reserve bank of India (RBI) that its invocation would not entail any liability on the Indian Respondent.

The Hon’ble Supreme Court framed two broad issues for consideration:

1. Whether the judgment of the English Court is in consonance with the requirements of Section 13 read with Section 44A of the CPC. 
2. Whether the judgment is rendered unenforceable in view of the conditions imposed by RBI in exercise of the statutory power under Foreign Exchange Regulation Act, 1973 (FERA).

Issue 1

The Court delved into the procedural and substantive procedure for enforcement of a Foreign Decree passed by a Court in a reciprocating territory. In its discourse the Court observed that even if a Foreign Judgement satisfies the procedural requirements under section 44A of the CPC¹, still the enforcement can be refused if the substantial test under Section 13 of is not fulfilled. 

Section 13 represents narrowly construed exceptions to the recognition of final adjudication rendered by competent Foreign Courts. Essentially these exceptions can be summarised as follows:

1. Foreign Judgement has not been pronounced by a Court of competent jurisdiction, both under the law of foreign country and in the international sense recognised under Private International Law.
2. Judgement must have been rendered after consideration of evidence and adjudication of substantive rights of the parties.  
3. Foreign Judgement is founded on the refusal to recognise law in India where such law is applicable.
4. Foreign Judgement rendered in violation of principles of natural justice, i.e. denial of fair opportunity to be heard.
5. Foreign Judgement sustaining a claim contrary to Indian law in force.

While examining the question of whether the Judgement was rendered on merits, the Court seemingly relied upon the principles relating to grant of leave to defend under Indian law provided under Order 37 Rule III of CPC.²

The Court then observed that, even while determining a lis in summary jurisdiction the Foreign Court must determine whether the Defendant has a realistic prospect of success by appreciating the evidence which may be reasonably expected to be available at trial. So far as the approach of the English Court in the present case is concerned the Court observed that, the facts were highly contested which compelled deeper scrutiny and therefore disposal in a summary jurisdiction without granting leave to defend is highly prejudicial. 

On what constitutes a realistic defence the Court observed 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.

Ultimately, the Court approved the view that, had the documents produced by the Respondent been considered at length by the Foreign Court then it could have made material difference to the outcome. Since triable issues were disclosed, it was incumbent upon the English Court to permit the documents produced by the Respondent to undergo the rigour of a full-fledged trial including oral evidence and cross examination. 

Issue 2 

The Court while expressing its opinion on this issue observed that there is a statutory distinction between institution of proceedings and enforcement of a Judgement. Where the legislation prohibits execution of a Judgement in the absence of regulatory approval then this condition precedent must be honoured and the power to grant or refuse permission should not be rendered otiose. 

The Supreme Court relied upon the Judgement of Bombay High Court in Algemene Bank Nederland NV v. Satish Dayalal Choksi (1989 SCC OnLine Bom 282) in arriving at a conclusion that where a statute proscribes enforcement of any Judgement without regulatory permission, this proscription is wide enough to include application for execution under the provisions of CPC.

Conclusion

After examining the facts and the scheme of Section 13 and 44A at length, the Hon’ble Supreme Court held the Foreign Judgement to be violative of Section 13 of CPC. The Court examined the factual matrix at considerable length to arrive at a decision whether the Foreign Judgement was rendered on merits. The English Court Judgement was also faulted on the ground that, it failed to give due effect to statutory permissions and conditions imposed under the erstwhile Indian Foreign Exchange law.

Comment

In the view of the authors, while the Judgement brings clarity on the scope of interpretation of whether a Foreign Judgement is passed on merits, yet there appears to be a deviation in applying the test contained under Section 13 narrowly.

Further, at the enforcement stage, the Hon’ble Supreme Court’s inclination to lay emphasis on the requirement of leading evidence based on its view that triable issues were disclosed before the Foreign Court tends to depart from its previous decisions laying down the contours of dealing with objections to execution of Foreign Judgements.

A foreign party would also be well advised to consider the statutory mandates while negotiating commercial contracts involving incidence of cross border payments, especially in light of the Hon’ble Court’s observations regarding the necessity of following such statutory mandates even at the time of execution of Foreign Judgements.

*When a foreign Judgement is non-conclusive

¹Which provides a special mode for the enforcement of decrees passed by superior courts of reciprocating territories2

²Procedure for the appearance of defendant