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TMI Blog2009 (7) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... ire a separate examination on which the arguments have not been heard yet.In the circumstances we are of the opinion that the appeal shall be listed for further hearing. - COMPANY APPEAL NO. 1 OF 2009 - - - Dated:- 29-7-2009 - CHELAMESWAR AND B.K. SHARMA JJ. J.L. Gupta, Mrs. M. Hazarika, Sanjay Bhatt, Ms. A. Ajitsaria and Sumanta Biswas for the Petitioner. A.K. Bhattacharyya, P.J. Saikia, A.N. Chaudhury, K.K. Bhattacharyya, A.K. Chaudhury and S. Dutta for the Respondent. JUDGMENT J. Chelameswar, C.J. - This company appeal arises out of an order dated 19-11-2008 in Company Petition No. 10 of 2002 [ California Pacific Trading Corpn. v. Kitply Industries Ltd. [2009] 148 Comp. Cas. 345 (Gau.)]. 2. For the purpose of the present full factual details of the company-petition may not be necessary and we shall state only those facts which are relevant. 3. The respondent herein, a company incorporated in America, filed the abovementioned company petition under sections 439, 433( e ) and 434(1)( b ) of the Companies Act, 1956, praying that the appellant, a company registered in India under the Companies Act, 1956, be wound up on the ground that the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an objection was, in fact, raised before the learned company judge in the additional affidavit filed by the appellant before the company judge on 5-2-2008, but the learned company judge failed to examine the said question. 8. Though various other grounds are raised in the appeal regarding the correctness of the judgment under appeal learned counsel appearing on behalf of either side in the appeal, agreed that if the abovementioned objection based on the non-compliance with section 44A of the Code of Civil Procedure is accepted, it goes to the root of the matter and the company petition, itself, is liable to be rejected on that ground and the other questions raised in appeal need not be gone into. 9. Hence, we heard submissions of learned counsel for both the sides on the abovementioned question and by an order dated 17-6-2009, adjourned the appeal for a decision on the abovementioned preliminary issue. 10. For deciding the correctness of the objections raised by the appellant we are required to examine the following questions : "(1)What is the legal efficacy of a decree/judgment of a foreign court, such as the one relied upon by the respondent herein, in this country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of the Code of Civil Procedure, which occurs in Part I, declares that "the courts shall have jurisdiction to try all suits of civil nature excepting suits of which their cognizance is either expressly or impliedly barred". Part I of the Code of Civil Procedure contains various provisions generally dealing with the suit and the jurisdiction of the courts to entertain the various kinds of suits and incidental matters. 14. Part II of the CPC deals with execution of the decrees (sections 36 to 42). None of the sections commencing from sections 36 to 42 makes any reference to the territorial jurisdiction of the courts which passed the decree in the context of the execution of such decrees. By necessary implication sections 36 to 42 deal with only the decrees passed by the courts to which the CPC applies. Such implication arises in view of the language and scheme of the later sections, more particularly, the expressions "judgment" and "foreign judgment" are respectively, defined under section 2(9) and (6), respectively. 15. Sections 43, 44 and 44A deal with execution of decrees passed by specified categories of courts with reference to the territory in which they are located a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty, but shall in no case include an arbitration award, even if such an award is enforceable as a decree or judgment." 17. Under Explanation I, a "reciprocating territory" is defined to be any country or territory outside India which the Government of India by notification in the Official Gazette declares as reciprocating territory for the purpose of section 44A. Similarly, the expression "superior court" occurring therein is also defined to mean such of those courts in a reciprocating territory which are notified by the Government of India to be superior courts. 18. While section 44A(1) declares that the decrees of superior courts of the reciprocating territories may be executed in India, the expression "decree" itself is explained to mean, under Explanation 2, an adjudication of the liability of the judgment debtor to pay a sum of money. In other words, what is popularly understood as a decree for payment of money. Obviously, decrees other than the money decrees, even though passed by superior courts of reciprocating territories, are not executable un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o try the suit in which such decree was passed. It must at once be noted that section 38 refers to the executing courts in India which have themselves passed the decrees in suits which were within their jurisdiction and were admittedly, therefore, competent courts. Such decrees passed by competent courts in India can also be executed by getting the decrees transferred to other competent courts in India provided the requirements of section 39(1) read with sub-section (3) are satisfied. Therefore, the transferee court in India must be a competent court, which at the time of making an application for transfer of decree by the decree-holder, should be shown to have jurisdiction to pass such a decree even originally. It is easy to visualise that, this requirement of a transferee court in India which gets jurisdiction qua such execution proceedings only on transfer from competent executing court which has passed the decree in India is conspicuously absent, when we turn to section 44A. It nowhere lays down that the District Court in which decree of any superior court of a foreign territory is submitted for execution by a foreign decree-holder must be a court which could have been compete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed foreign judgments from the seventeenth century onwards. It was at one time supposed that the basis of this enforcement was to be found in the doctrine of comity. English judges believed that the law of nations required the courts of one country to assist those of anyother, and they feared that if foreign judgments were not enforced in England, English judgments would not be enforced abroad. But later this theory was superseded by what is called the doctrine of obligation, which was stated by Parke B. in Russel v. Smyth [1842] 9 M. W. 810 and Williams v. Jones [1845] 13 M. W. 628 and approved by Blackburn J. a generation later in Godard v. Gray [1870] L. R. 6 Q. B. 139 and Schibsby v. Westenholz [1870] L. R. 6 Q. B. 155 in the following words : We think that . .. the true principle on which the judgments of foreign tribunals are enforced in England is ... that the judgment of a court of competent jurisdiction over the defendant imposes a duty or obligation on the defendant to pay the sum for which judgment is given, which the courts of this country are bound to enforce; and consequently that anything which negatives that duty, or forms a legal excuse for not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as (in which event it would not be so regarded) ? Scott J. took as the starting point the suggestion in Schibsby v. Westenholz [1870] L. R. 6 Q. B. 155 that the basis of the jurisdiction of a foreign court over resident aliens was that they had the benefit of the protection of the laws of that country or owed temporary allegiance to it. Scott J. concluded that the relevant country was the United States because the source of authority of the Federal Court was in the sovereign power which established it, namely, the United States. The Court of Appeal was sceptical about the application of the idea of allegiance as being the basis of the obligation, and saw the judgment debtor s duty to abide by the foreign judgment as deriving from the fact that by going to a foreign place he invests himself by tacit consent with the rights and obligations stemming from the local laws as administered by the local court . In the event, it was not necessary to decide this issue, because (like Scott J.) the Court of Appeal held that the judgment debtor had not been present or resident in Illinois ; but the Court of Appeal indicated that if it had been necessary to decide the question, it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring an action on the foreign judgment". This principle is also accepted in India. The Supreme Court in Roshanlal Kuthalia v. R.B. Mohan Singh Oberoi [1975] 4 SCC 628, at paragraph 19, has held as follows (page 637) : "Ordinarily, a suit on foot of a foreign decree is sustainable and section 13 of the CPC sets out the limitations on the amplitude of the right. This proposition is not disputed...." 28. Again in paragraph 20 it was held that (page 637) "A foreign judgment is enforceable by a suit upon the judgment which creates an obligation between the parties". 29. Section 13 of the Code of Civil Procedure sets out the limitations on the recognition of a foreign judgment. "Foreign judgment" is defined under section 2, sub-section (6) of the Code of Civil Procedure to mean the judgment of a foreign court. Whereas the expression "foreign court" is defined under section 2, sub-section (5) as follows : " foreign court means a court situate outside India and not established or continued by the authority of the Central Government." 30. Therefore, section 13 of the Code of Civil Procedure provides for the "recognition" of foreign judgment subject to the various limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroduced." 32. Before the introduction of section 44A of the CPC, i.e., in 1937 the question of direct enforcement of a foreign decree in India did not arise. The only possibility was seeking the recognition of a foreign decree by filing a suit for a decree by the Indian courts in terms of the foreign decree. 33. Under the scheme of the Indian Evidence Act, 1872, sections 40 to 43, the evidentiary value of a judgment is limited. 34. Under section 40 of the Evidence Act the existence of any judgment, order or decree is a relevant fact when the question is whether the court ought to take cognizance of a suit if taking of the cognizance of a suit is prohibited by law in view of the pendency of an earlier suit between the same parties on the same subject-matter or in view of determination by a competent court of the issues between the same parties if sought to be raised in a subsequent suit, etc. In other words section 40 declares the existence of a prior judgment relevant in the situations covered by sections 10, 11 and 12 of the CPC. 35. Section 41 of the Evidence Act declares the existence of a final judgment or decree of a competent court to be relevant if such p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n England. It does not, however, necessarily mean that the Indian Legislatures cannot prescribe other modes of recognition or enforcement of foreign decrees other than the ones provided under the CPC, as discussed above. Therefore, the question is whether sections 433, 434 and 439 prescribe a different mode of enforcement of a foreign decree. 43. Section 433 4 of the Companies Act stipulates the various contingencies under which a company may be wound up by the court. One of the contingencies is that "the company is unable to pay its debts". 44. Section 434 of the Act creates a fiction that a company shall be deemed to be unable to pay its debts in the two contingencies specified under sub-section (1)( a ) and ( b ) which reads as follows : "434. Company when deemed unable to pay its debts. (1) A company shall be deemed to be unable to pay its debts ( a )if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding one lakh rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Registrar to move an application to wind up a company on the ground that it is unable to pay its debts the very fact that even the Registrar is also in certain circum-stances enabled to invoke the ground that the company is unable to pay its debts for seeking the winding up of the company, in our view, indicates that the proceedings under section 439 are not in the nature of execution of a decree within the meaning of the Code of Civil Procedure. Under the scheme of the CPC a decree creates rights in favour of the person holding the decrees which conclusively determine the rights of the parties with regard to all or any of the matters in controversy in the suit. Necessarily, the matters in controversy are to be adjudicated in the suit on the basis of the rights of the parties to the suit and such rights can inhere only in the party exclusively whereas the right to seek winding up of a company on the ground that the company is unable to pay its debts is not a right that exclusively inheres in the creditors. There are other classes of persons specified under section 439 who can also seek such winding up of the company subject of course to the limitations imposed under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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