2014 (3) TMI 715 - HC - Companies Law

Winding up petition - Is an ex-parte default summary judgment obtained in a nonreciprocating foreign country against an Indian company a debt due and payable by it within the meaning of Section 433(e) of the Companies Act, 1956? - Held that - The entire petition is based on, and only on, the Houston decree. There is no mention in the petition of the original cause of action. Mr. Narula s submission that the Houston decree was on merits is not one that I am prepared to accept. There is no reference to Coastal Marine in any part of the preceding discussion. The only discussion on summary judgment evidence is at internal page 5, and none of it is in relation to Coastal Marine, which is not mentioned even once. Section 13 uses the words any matter thereby directly adjudicated upon . The word matter means the right claimed, not the subject-matter. The Houston court decree has not been made a rule of an Indian court. It has not been subjected to the discipline of Section 13 of the CPC. It is not possible to hold that there is any debt due within the meaning of Section 433 and Section 434 of the Companies Act, 1956. - petition dismissed - Decided against the petitioner.

Issues Involved:

1. Whether an ex-parte default summary judgment obtained in a non-reciprocating foreign country against an Indian company constitutes a 'debt' under Section 433(e) of the Companies Act, 1956.
2. Applicability of Section 13 of the Code of Civil Procedure, 1908 (CPC) to foreign judgments.
3. The requirement for a foreign decree from a non-reciprocating territory to be made a rule of an Indian court.
4. The distinction between judgments from reciprocating and non-reciprocating territories.
5. The maintainability of a winding-up petition based on a foreign decree.

Detailed Analysis:

1. Ex-parte Default Summary Judgment as 'Debt' Under Section 433(e) of the Companies Act, 1956:

The petitioner, Marine Geotechnics LLC, sought to wind up Coastal Marine Construction & Engineering Ltd. based on a default judgment from the US District Court, Southern District of Texas. The petitioner argued that the foreign decree constituted a 'debt' under Section 433(e) of the Companies Act, 1956. However, the respondent contended that the judgment was ex-parte and not served upon them, thereby questioning its validity as a 'debt.'

2. Applicability of Section 13 of the Code of Civil Procedure, 1908 (CPC):

The respondent argued that the foreign judgment must satisfy the conditions of Section 13 of the CPC to be considered conclusive. Section 13 outlines exceptions where a foreign judgment is not conclusive, such as lack of competent jurisdiction, not being on merits, and being obtained by fraud. The court emphasized that a foreign decree, especially from a non-reciprocating territory, must pass the tests of Section 13 to be enforceable in India.

3. Requirement for a Foreign Decree from a Non-Reciprocating Territory to be Made a Rule of an Indian Court:

The court held that for a decree from a non-reciprocating territory to be enforceable, it must be made a rule of an Indian court through a suit filed on that judgment. The petitioner had not filed such a suit, and the decree had not been subjected to the scrutiny of Section 13 of the CPC.

4. Distinction Between Judgments from Reciprocating and Non-Reciprocating Territories:

The court distinguished between judgments from reciprocating and non-reciprocating territories. A decree from a reciprocating territory can be executed directly under Section 44A of the CPC. However, a decree from a non-reciprocating territory requires a suit to be filed in India to make it enforceable. The court cited multiple precedents, including the Supreme Court's rulings, to emphasize this distinction.

5. Maintainability of a Winding-Up Petition Based on a Foreign Decree:

The court concluded that a winding-up petition cannot be based solely on a foreign decree from a non-reciprocating territory without satisfying Section 13 of the CPC. The petition must show that the foreign decree is on merits and meets the requirements of Section 13. In this case, the Houston court's decree was a default summary judgment for non-appearance and did not involve any adjudication on merits. Therefore, it did not constitute a 'debt' under Section 433(e) of the Companies Act, 1956.

Conclusion:

The petition was dismissed as it was not maintainable. The court held that a foreign decree from a non-reciprocating territory must pass the test of Section 13 of the CPC to be considered a 'debt' for winding-up proceedings. The Houston court's decree was a default judgment without any adjudication on merits, and thus, it did not meet the requirements to be enforceable in India.

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