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TMI Blog2005 (2) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... 879,750 within three weeks. On the company refusing to make this payment and contesting the same through its Advocates vide reply dated 27th July, 1993, present petition seeking winding up of the company is filed under Section 433(e), (f) read with Section 434 of the Act. Thus the primary ground is that the company owes 'debt' to the petitioner and is unable to pay the debt. The company has challenged the maintainability of such a petition filed on the basis of an ex-parte foreign decree contending that it is not a 'debt' and such a foreign decree is non est and not binding on the company who has right to contest on the grounds available to it under Section 13 of the CPC. The question, therefore, would be whether such a foreign decree would be a 'debt' and whether such a petition is maintainable? 2. Before adverting to the aforesaid questions, we may first take note of bare facts and brief description thereof would suffice. 3. According to the petitioner, by an agreement contained in two telexes dated 14th 17th September, 1990 the petitioner agreed to purchase approximately 1500 Metric Tonnes (MT) of EC grade aluminium rod according to the specificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was served on the company on 27th January, 1993 in India. The company, however, refused to participate in those proceedings and the High Court of Justice, Queens Bench Division, London passed a decree in the sum of US $ 879,750 and interest thereon as well as cost to be taxed. The petitioner sent notice dated 12th July, 1993 under Section 434 of the Act demanding the aforesaid sum. The company replied vide letter dated 27th July, 1993 denying any liability. The petitioner claims debt payable and seeks winding up of the respondent company by means of this petition. 5. In the reply filed by the company, it is, inter alia, contended that the petition is misconceived and abuse of the process of law and is filed to pressurize to part with huge amount which is not due and recoverable from the company. Facts and figures are given to indicate that the company is a profit making venture and a viable company with huge turnover and is giving gainful employment to nearly 1000 workers. It is also the case of the company that the petition based on a judgment of a foreign Court, which is a nullity in law, is not maintainable inasmuch as the said foreign Court had no jurisdiction over the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany, a foreign decree which is not automatically enforceable cannot be a basis for instituting winding up petition also as it would not be an evidence of any 'debt'. (b) Even if it is treated that such a petition is maintainable, whether this Court can go into the question of validity of such a decree on the touchstone of Section 13 of the CPC? 7. I have already indicated above, in brief, the respective cases of both the parties. In support of his plea that the present petition is maintainable, Mr. Chandhiok, learned senior counsel for the petitioner submitted that on the basis of a decree passed by a foreign Court against the judgment debtor, which is a company, decree holder has all remedies with it, i.e., either to go to the District Court seeking execution of such a decree as required under Section 44-A of the CPC or to apply to the Company Court of competent jurisdiction for winding up of the judgment debtor. According to him, decree constitutes a 'debt' within the meaning of Section 433(e) of the Act. Therefore, failure to meet its debt by a judgment debtor company invites provisions of Section 433(e) and 434 of the Act. Referring to and relying upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a certain way the thing must be done in that way and not at all. Other methods of enforcement of foreign decree would, by necessary implication, be forbidden. On the plain language of Section 44-A of the CPC, submitted the learned counsel, it would be an unnatural construction to hold that any other procedure was permitted than that which is laid down with such minutes particularity in the sections themselves. On this analogy, winding up petition to enforce a foreign decree would not be maintainable. Learned counsel referred to the following judgments in support of this proposition: (i) Uthamram Vs. K.M. Abdul Kasim Co.,: AIR 1964 Madras 221 (ii) Sheik Ali Vs. Sheik Mohamed,: AIR 1967 Madras 45 (iii) Nazir Ahmad Vs. King-Emperor: AIR 1936 Privy Council 253 (iv) Babu Verghese and others Vs. Bar council of Kerala and others: (1999) 3 SCC 422. 10. He laboured to demonstrate that the decree in question was non-executable as it would clearly fall within the exceptions specified in Section 13 of the CPC, i.e. (a) not been pronounced by a court of competent jurisdiction. (b) not been given on the merits of the case. (c) proceedings were opposed to natural justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners, cited several authorities, viz., Unique Cardboard Box Mfg. Co. P. Ltd., In re.: [1978] 48 Comp Cas 599, All India General Transport Corporation Ltd. v. Raj Kumar Mittal: [1978] 48 Comp Cas 604, Madhuban Pvt. Ltd. v. Narain Dass Gokal Chand [1971] 41 Comp Cas 685 and Seethai Mills Ltd. v. N. Perumalasamy: [1980] 50 Comp Cas 422 and submitted that as far as the petitioners were concerned, both the remedies, viz., application for execution of the decree as well as the filing and prosecuting of the winding up petition were available and that it was well settled that a winding up petition was an equitable mode of execution in respect of the claim of a creditor of a company. It was further submitted and, in my opinion, rightly, that there was no question, as contended by Mr. Dada, of the validity of the decree being resolved first and that then only there would be any failure to pay the debt inasmuch as the debt is a present obligation to pay in present time or at a future date. Mr. Doctor relied on a decision in the case of Kudremukh Iron Ore Co. Ltd. v. Rooky Roadways (P) Ltd.: [1990] 69 Comp Cas 178, a decision in the case of Registrar of Companies v. Kavita Benefits Pvt. Ltd. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentation of a winding up petition. A winding up petition can be admitted if made on the basis of an unfiled award as was held in Kalyani Spg. Mills Ltd. v. Shiva Trading Co. [1983] 53 Comp Cas 6632 (Cal.) and Dalhousie Jute Co. Ltd. V. Mulchand Lakshmi Chand: [1983] 53 Comp Cas 607 (Cal.). Admittedly, the decree has not been executed and the decretal amount has not been realised in the instant case. 14. Although the judgment of the Gauhati High Court was based on a decree passed by the Indian court, the judgment of the Bombay High Court holding the company petition to be maintainable was in respect of a decree passed by a foreign court. Therefore, following proposition can be culled out from these judgments: (a) When a creditor obtains a decree from a court, he has both the options, namely, to file execution and also to file winding up petition against the judgment debtor if it happens to be a company incorporated under the Act. (b) A decree awarded in favour of the decree holder would be a 'debt' within the meaning of Section 433(e) of the Act. (c) It is not necessary to await the decision in the execution if execution is filed. (d) This principle shall ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch also concluded that an application on behalf of Dominion of India for winding up of a company was maintainable even if the company was disputing the quantum of the tax assessed in further proceedings and the Crown could invoke machinery of winding up for recovery of revenue. However, immediately thereafter, the opinion expressed was that the modern practice was to dismiss a petition and the winding up petition is based on a 'debt' which is bona fide disputed by a company. Where the debt was disputed, the duty of the court was to see first as to whether dispute is on the face genuine or merely a cloak of the company's real inability to pay its just debts and recourse should not had to winding up proceedings for the purpose of recovering a disputed debt or for stifling proceedings which seek to challenge or impugn such debts. While setting the law in the aforesaid manner, the court made certain observations which have direct bearing on the present case as these observations are in the context of a petition filed on the basis of a decree. It would, therefore, be apposite to reproduce these observations verbatim: In re: The United Stock Exchange Limited [51 Law Times ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In re: [1953] 23 Comp Cas 81 : AIR 1953 Cal 387, Fraser, In re [1892] 2 QB 633, 638, Official Receiver v. Abdul Shakoor,: AIR 1965 SC 920, 924, Om Prakash Mohta v. Steel Steel Equipment and Construction Co. P. Ltd.: [1968] 38 Comp Cas 82 (Cal): [1967] Comp LJ 172. It is an undeniable proposition of law which emerges from these cases that the civil court granting the decree does not thereby bind either a court in bankruptcy or a winding-up court. The rationale is that a debt, which succeeds in the causing of a declaration of bankruptcy, or in the causing of initiation of the process of winding-up of a company, enures to the benefit or prejudice of not only the creditor in question, but of all other creditors and contributories, as the case might be, and at the same time causes civil death of the individual bankrupt or the wound up company, again, as the case might be, third parties are involved. Thus, the winding up court goes behind the decree wherever serious questions are raised about the decree having been obtained by fraud or collusion, or where there is a serious allegation about the lack of jurisdiction of the court passing the decree, or where a serious miscarriage of ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cannot be accepted. I may point out that even the Bombay High Court in the case of Silver Shield Construction and Trading Ltd. (supra) did go into the question about the validity of the decree with reference to Section 13 of the CPC. As a matter of fact, it was found that the contract between the parties in the said case, which was an oral, had been arrived at in London and, therefore, the London court had jurisdiction over the matter. It was also found that the Indian company, in any case, had submitted to its jurisdiction. The court had also arrived at a finding that the London court's judgment was not ex-parte but based on merits and despite adequate opportunity afforded by the court, the Indian company had failed to avail of it and could not, therefore, complaint that judgment was opposed to natural justice. The court also rejected the contention of the Indian company that the contract on which the suit in London had been based contravened Section 27 or Section 47 of the Foreign Exchange Regulation Act. It was concluded by the court that in the absence of any valid ground for disputing the foreign judgment. it was conclusive and in these circumstances the winding up petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manner aforesaid, I would now proceed to examine the objections of the company to a foreign decree on the basis of which present petition is filed. 21. The factual matrix of contract between the parties, has already been noted above. It is a case where the company repudiated the agreement on the ground that it has become impossible of performance. The petitioner, on the other hand, pressed the company to perform its obligation under the contract by denying delivery of remaining 1250 MT, balance quantity to be delivered under the agreement. The petitioner had initially sought reference of dispute for arbitration to London Metal Exchange. However, this court, in proceedings filed by the company under Section 33 of the Arbitration Act, 1940 concluded that there was no arbitration agreement between the parties and, therefore, it was not open to the petitioner to seek the reference. The petitioner, thereafter, filed a suit in the High Court of Justice Queens Bench Division, London for recovery. On receiving summons of this suit, the company was categorical in its stand that the London court had no jurisdiction. It refused to participate in the proceedings before the London court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate evidence on the aforesaid aspect. No material is produced before me which could show that exercise of this nature was undertaken by the London court before passing a decree in favour of the petitioner. Such a decree would, therefore, be not binding in view of provision of Section 13 of the CPC which is to the following effect: When foreign judgment 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- (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]. 24. Therefore, on the basis of aforesaid te ..... 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