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TMI Blog2011 (5) TMI 1069X X X X Extracts X X X X X X X X Extracts X X X X ..... eon. It may be recorded herein that the judgment debtor Kitply has not filed any appeal against the decree and the decree holder California too has not taken any steps for execution of the decree, but have chosen to file this winding up petition against Kitply in a court in India. LITIGATION HISTORY 2.1. The admission of the winding up petition was resisted by the Respondent who contended that the petition is not maintainable and the remedy of the Petitioner lies in execution of the decree. The Respondent also contended that assumption of jurisdiction by the Court of Middle District North Carolina was erroneous and the decree of the U.S. Court is hit by Section 13 of the Code of Civil Procedure as the Plaintiff seeks to enforce the decree in Indian Court. But on a prima facie examination of the objection, the Company Judge on 18.11.2003 ordered advertisement of the winding up petition. Then Kitply challenged the order by filing Company Appeal 4/2004. The Division Bench in its order dated 22.8.2006 held that the amount due under the decree of the District Court of the USA is a debt for the purpose of Section 433(e) of the Act. The Court also held that the decree holder could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 was finally ordered on 23.12.2009 wherein the Division Bench held that it is open to the judgment debtor to resist the enforcement of a foreign Court's decree for any of the 6 exceptions in Section 113 of the Code of Civil Procedure and the matter was remitted back to this Court for a fresh adjudication on all the issues raised by the judgment debtor. CONTENTION OF PETITIONER 3.1. The Petitioner contends that the Respondent company supplied defective marine teak plywood to the Petitioner which were rejected by its customers i.e. McEwen Lumber Company ( McEwen ) and Weber Plywood and Lumber Company ( Weber ) and since the defective goods were not replaced, the Petitioner suffered loss of current and future business. Accordingly a civil lawsuit was initiated for recovery of loss and damage in the United States District Court for the Middle District of North Carolina and the said suit was decreed on 12.4.2000 for U.S. $22,57,147.58 with interest and no appeal being filed against the said decree, it became final. Accordingly the decreed amount became payable by the Respondent to the Petitioner and since a demand made upon the Respondent to pay the equivalent Indian sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as cost and action of the litigation. He submits that in a business contract, margin of profit is always a subject of assumption and the extent of future profit on the basis of an on going business relationship, is a matter to be determined through evidence and since the Court took into account the evidence adduced by the Plaintiff, the damage awarded was reasonable and on proper assumption. The Counsel submits further that even under Section 73 of the Indian Contract Act, 1872 compensation claim for loss or damage caused by breach of contract is maintainable and the U.S. Court has appropriately quantified the loss and damage from natural and proximate consequence of the breach made by the Respondent and therefore the decree of the U.S. Court should be recognized for this winding up proceeding. 3.5. The Petitioner contends that unliquidated damage once assessed and upon adjudication by a competent adjudicatory authority do give rise to a debt against a judgment debtor and since the Respondent failed to repay the dues upon demand, it must be deemed unable to pay its debt and a proceeding for winding up against such defaulting company is maintainable. 3.6. Defending the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court, except in matters expressly or impliedly decided by the order of remand. Referring to the recording in the remand order dated 23.12.2009 of the Division Bench, Mr. Talukdar points out that this Court is free to consider all the objections(s) raised under 13 Code of Civil Procedure as this has also been conceded by the learned Counsel who appeared for the Petitioner California. 4.2. The learned Senior Counsel questions the enforceability of the decree passed by the District Court of North Carolina, USA, by contending that the judgment is not conclusive in as much as, it was not passed by a Court of competent jurisdiction. The Counsel points out that no part of the cause of action amongst the parties arose within the jurisdiction of the foreign court and therefore the decree passed by the foreign Court is not conclusive and is hit by Clause (a) of Section 13 Code of Civil Procedure . 4.3. The Respondent refers to the plaint filed by California to project that the Plaintiff hasn't indicated how the Court at USA has territorial jurisdiction over a contractual dispute, where the contract was concluded and executed in Indian territory. He submits that the U.S. Court migh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relies upon the Supreme Court decision in Union of India v. Raman Iron Foundry reported in (1974) 2 SCC 231 to submit that a party complaining of breach of contract can recover only reasonable compensation proximate to the damage sustained and a claim for unliquidated damage does not give rise to a debt, until the liability is adjudicated and damage assessed on evidence, by an adjudicating authority. When there is a beach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the aggrieved party secures is the right to sue for damage. By referring to this judgment, the learned Counsel contends that the alleged damage suffered by the Plaintiff California has not been assessed through evidence by the North Carolina Court and the damage is quantified on the basis of conjecture only and therefore recognition of such a decree of damage is impermissible and on that basis a debt can't be enforced against the Respondent in an Indian Court. 4.5. The Senior Counsel submits that since the suit was filed beyond 3 years of caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets out the limits on application of decree passed by a foreign Court and no proceeding to recover a debt on the basis of a foreign decree can be initiated, without fulfilling the conditions laid down in Clauses (a) to (f) of Section 13 of the Code of Civil Procedure . In support of this contention, he relies upon the decision of the Supreme Court in Roshanlal Kuthalia v. R.B. Mohan Singh Oberio reported in (1975) 4 SCC 628 and Smt. Satya v. Teja Singh reported in AIR 1975 SC 105. 4.8. The decision of the Apex Court in Raj Rajendra Sandar Moloji Nar Singh Rao Shitole v. Shankar Saran reported in AIR 1962 SC 1737 is also relied on by the learned Counsel to show that the provisions of Section 13 of the Code of Civil Procedure are not merely Rules of procedure but are Rules of substantive law and the decree of the U.S. court must be valid in the international sense and can't be enforced ipso facto in Indian Courts only because, the proceeding in the North Carolina Court conforms to the municipal laws applicable in USA. 4.9. Assailing the finding recorded by the District Court at USA that the Defendant waived their right to contest the Court's jurisdiction as it filed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and evidence to consider the objections raised under Clauses (a) to (f) of Section 13 of Code of Civil Procedure , the winding up proceeding is not maintainable. Relying on the decision of the Apex Court in IBA Health (India) Private Limited v. Info-Drive Systems SDN. BHD reported in (2010)10 SCC 553, Mr. Talukdar submits that Kitply has raised a bona fide dispute based on substantial grounds and the debt is hotly contested and accordingly he contends that the Company Court is not expected to hold a full trial into the matter and considering the substantial nature of objection(s), the winding up petition should be dismissed. DISCUSSION ON ARGUMENTS 5. The arguments advanced by the rival Counsels requires me to adjudicate as to (i) whether the winding up petition is maintainable; (ii) whether the judgment of the North Carolina Court is conclusive in the context of Section 13 of Code of Civil Procedure and (iii) whether the foreign judgment should be recognized for enforcing a debt claim against the judgment debtor, in an Indian court. WINDING UP OBJECTION 6. For considering an winding up petition for enforcing a payment of debt, it is the duty of the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Salem reported in AIR 1989 SC 1239 it has been held that the jurisdiction of the Court in the matter of a contract will depend on the situs of the contract and the cause of action arising through connecting factors. It is further held that in a suit for damage for breach of contract, the cause of action consists of making of the contract, and its breach, so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. But it has been held in this case that making of an offer on a particular place doesn't form the cause of action in a suit for damage for breach of contract . 10.2. it may also be useful to take note of the decision of the Kerala High court in V. Sreedharan v. T.T. Nanu reported in AIR 1987 Ker 249, where the Division Bench has held that the place of preliminary negotiation, do not determine the jurisdiction of the Court to try a suit. 11.1. In the plaint filed, the Petitioner has conceded the Respondent (Defendant) to be a company registered in India with its principal place of business at Calcutta. The Situs of the contract and the delivery of goods and breach if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n obedience to the process of a foreign court and applies for leave to defend the suit without objecting to the jurisdiction of the Court when he is not compelled by law to do so, must be held to have voluntarily submitted to the jurisdiction of the Court. Accordingly it was declared that the foreign decree doesn't suffer from the defect which a foreign ex parte decree, without such submission may suffer. But the facts in Narhari Shivram Shet Narvekar (supra) is distinguishable since the Respondent herein, categorically objected to the jurisdiction of the North Carolina Court and accordingly can't be said to have acquiesced to the jurisdiction which would disentitle him to raise the jurisdictional question of the foreign court. Accordingly the contrary conclusion of waiver reached by North Carolina Court is declared to be erroneous. 12.3. Furthermore the Plaintiff's pleadings if one reads them as it is, do not disclose any cause of action against, what is averred to be an Indian Company with its principal place of business at Calcutta. Therefore on consideration of the ratio of Mayar (H.K.) Ltd. v. Owners and Parties, Vessel M.V. Fortune Express; Kamala v. K.T. Eshwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court was aware that the Plaintiff, certified the goods to be of contracted standard and dispatch-worthy. In the context of the Petitioner's non disclosure, it has to be declared that the decree of the North Carolina Court is hit by the exception Clause (e) of Section 13 of Code of Civil Procedure . Withholding of the certificates will have a bearing also on the specification of the contracted goods and this is being considered in the next paragraphs. SPECIFICATION OF THE CONTRACTED GOODS 15. In this case 2 specifications are mentioned by the Plaintiff for the contracted goods and it is necessary to understand goods of which quality was contracted for, the breach of which is alleged in the case. In the Certificates of Inspections, the Plaintiff had projected that the ordered material should meet the Carolina Pacific Trading Standards and it was accordingly approved for shipment . But in the plaint mention of the 2 customers of the Plaintiff was made and it was stated that the Defendant would manufacture teak marine plywood with the standards propagated by the International Hardwood Products Association (IHPA Standards). Therefore if the Plaintiff approved shipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his aspect, the ratio of the cited case is applicable here. 17. In the above context, the decision in Mcdermott International Inc. v. Burn Standard Co. Ltd. reported in (2006) 11 SCC 181 relied upon by Mr. Dutta, the learned Senior Counsel is distinguishable in as much as, the Court in that case was considering computation of damages by application of the Emden Formula. The claim in that case was proved by application of the formula, which is widely accepted as a method for computation of damage under different heads such as overheads, loss of profit, overtime, productivity and so on. Seeing the basis for damage quantification, the Court held that Emden Formula in assessing the damage was a correct act of the Arbitrator. But in the present case, not to talk of any such well recognized formula, there is nothing by way of evidence to show how the Court computed the loss of future business, allegedly suffered by the Plaintiff. Therefore I declare that the ratio of Mcdermott International Inc.(Supra) relied upon by the Petitioner, has no application in the facts of the present case. 18. As we are on damage quantification, it may be apposite now to note of the observation of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he alleged breach of contract. In the U.S.A. a suit filed within 4 years under the applicable American Law of Limitation is maintainable. But under Article 55 of the Schedule to the Indian Limitation Act, 1963, time limit of 3 years is prescribed for claiming compensation for breach of contract. Therefore it is apparent that the North Carolina Court's decree is opposed to the Indian Limitation Act which must be construed as fundamental policy of Indian Law. If recognition of the U.S. Court's decision is sought for any proceeding in that country, it can't obviously be resisted by citing the Indian Law of limitation. But for the foreign decree to be recognized in an Indian Court, it must be in conformity with fundamental policy of Indian Law. 20. On reading of the last decision relied upon by the Petitioner i.e. State of Meghalaya v. Jyotsna Das reported in 1991 (1) GLT 389, I feel that the ratio therein can have no application here since that was a claim under Tort default, made under Section 19 of the Code of Civil Procedure (against the State of Meghalaya for wrongful confinement of the purchased cement during transit) and was not a claim against the seller of cemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government. Therefore, Section 13 of the Code of Civil Procedure provides for the recognition of foreign judgment subject to the various limitations in the Sub-sections (a) to (f) thereof by the Indian Courts and makes it conclusive between the parties. In other words, when a holder of a foreign decree approaches the appropriate Court in this country to which the provisions of the Code of Civil Procedure apply, unless the Defendant succeeds in establishing any one or some of the objections enumerated under Clauses (a) to (f) of Section 13 the judgment of the foreign court is declared to be conclusive as to any matter that is directly adjudicated between the same parties and the decree is required to be passed in terms of the said foreign judgment by the Indian court. Thereafter, the decree can be executed in the manner provided by the Code of Civil Procedure. 22. Answering the question on conclusiveness of foreign judgment, the Supreme Court in R. Viswarathan (Supra) has declared that provisions of Section 13 of the Code of Civil Procedure are condition precedent to the conclusiveness of foreign judgments ....and.... both judgments in rem and judgments in personam are con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo buyers. 27. There is also reasonable basis for concluding that the judgment of the North Carolina Court has been obtained by playing fraud on Court. The necessary discussion on this aspect is already made in the earlier part of this judgment and all that should now be said is that the relevant certificates showing that the materials were of contracted standards and dispatch worthy were withheld and the probability of the Court giving a different verdict if the withheld materials were available, is a distinct possibility. Accordingly I am of the opinion that the exception under Clause (e) of Section 13 of the Code of Civil Procedure has been successfully projected in this case by the Respondent. 28. It is further seen that the suit for damage was filed by the Petitioner in the North Carolina Court 3 years after the alleged breach which is beyond the prescribed period of limitation in India. Since the foreign judgment to be conclusive, is required to be in conformity with the law in India, I hold that the North Carolina Court's decree is inconclusive, as it is covered by exception Clause (c) of Section 13 of the Code. 29. The objection of the Respondent on enforceabil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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