A.K Sikri, J.:— This petition raises an interesting, and at the same time an important question of law. The petitioner has obtained a foreign decree against the respondent (hereinafter referred to as ‘the company’) for an amount of US $ 879, 750. It is an ex-parte decree of the High Court of Justice Queens Bench Division, London passed on 30th April, 1993. Since the decree is by a foreign Court against an Indian company, if the petitioner wanted to recover this amount, procedure contained in the Code of Civil Procedure (CPC) had to be followed. The petitioner chose not to take that recourse. Instead on the basis of this ex-parte foreign decree, it served a demand notice dated 12th July, 1993 under Section 434 of the Companies Act, 1956 (for short ‘the Act’) requiring the company to pay the said sum of US $ 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 specifications and terms specifically set out in the said telexes. The express terms of the agreement were as under:
“(a) Price - United States dollars $ 2045 per metric tonn- CIF Bombay
(b) Shipment-During 1991 on the basis of 250 metric tonnes for the months of January/March/April; May/June; July/August; September/October and November/December.
(c) Payment was to be by irrevocable Letter of Credit to be opened/issued by a bank of the petitioner choice, the said letter of credit to be payable within 60 days from the date of the Bill of Lading against presentation of certain documents as more particularly set out in the Agreement.”
4. There were certain amendments in the aforesaid telexes vide communications dated 1st February, 1991 and 26th April, 1991. By these amendments, terms of shipment were changed so as to provide delivery of 250 MT per month for the months of February, April, May, July, September and November, 1991. First 250MT of the material was duly delivered and paid off. Vide amendment dated 26th April, 1991, the shipment scheduled was again changed so as to provide for delivery of 500MT in May and 250MTs each in the months of July, September and November, 1991. However, the company vide telex dated 3rd June, 1991 and followed by subsequent telexes, sought to repudiate the agreement on the ground that it had become impossible of performance. The petitioner, on the other hand, pressed the company to perform this obligation with regard to remaining 1250 MT still to be delivered under the agreement. However, since the company maintained that the agreement had become impossible of performance, the petitioner ultimately repudiated the agreement vide telex dated 5th August, 1991 and treated as breach on the part of the company. The petitioner sought reference of dispute for arbitration to London Metal Exchange. However, this was challenged by the company by filing petition under Section 33 of the Arbitration Act, 1940 contending that there was no such arbitration agreement. This plea was accepted by this Court holding that no arbitration agreement was in existence between the parties for reference of the alleged disputes to London Metal Exchange. The petitioner, thereafter, filed a suit in respect of its claim for the sum of US $ 879,750 with interest in the High Court of Justice, Queens Bench Division, London and summons was issued by the said High Court 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 company; proceedings were ex-parte and in utter disregard of the well established principles of international law known as ‘Forum non-conveniens’; the petitioner has no locus standi to maintain this petition and was not even competent to institute and proceed with the suit before the London Court and obtain the decree as it had no real right, title or interest in the goods that are subject matter of the agreement being the subject matter of the proceedings before the London Court as well as in the proceedings herein. According to the company, the actual supplier of the material was one foreign exporter M/s Alcon, Canada. The petitioner as merely an intermediary, assuming no legal obligation or otherwise, whatsoever. The actual supplier under the agreement had agreed to be made by the foreign exporter M/s Alcon, Canada. For the reasons best known to the petitioner, the said foreign exporter, the name of the real contracting party, who had agreed to make supplies to the company, was neither disclosed at the time of agreement nor before London Court or before this Court. It is stated that besides the fraud played by the petitioner, even otherwise the agreement itself was void because of apparent mistake that the petitioner had no right, title or interest in the goods to be delivered thereunder. Therefore, the alleged debt is not at all legally due and owed by the company to the petitioner. It is also stated that this petition by a foreign company, without compliance of the requirement of law, particularly Section 599 of the Act read with Section 47 of the Foreign Exchange Regulation Act, 1973 is wholly incompetent. According to the company, the petitioner has taken this coercive step by filing the winding up petition rather than instituting a regular civil action.
6. As would be clear from the respective cases of the parties, following two questions would arise for consideration:
(a) Whether the winding up petition would be maintainable on the basis of a foreign decree? To put it differently, whether it is necessary on the part of the holder of a foreign decree to seek execution of the decree under section 44-a of the cpc?
This assumes importance because in such an execution, when filed, the judgment debtor can contest the foreign decree on various grounds, including the grounds stated in section 13 of the cpc. Therefore, according to the company, 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 the judgments in the cases of R. Rathinavel Chettiar and another v. V. Sivaraman and others reported as (1999) 4 SCC 89 (para 12) and Badat and Co., Bombay v. East India Trading Co. reported as AIR 1964 SC 538 (para 6), the submission of learned senior counsel was that a foreign decree would be contractual debt. The learned senior counsel also relied upon the judgment of the Bombay High Court in the case of Silver Shield Construct on and Trading Ltd. v. Recondo Ltd. reported as (1994) 15 Corporate Law Adviser 92 (Bombay) as well as judgment of the Gauhati High Court in the case of Tube Investment of India Ltd. and another v. Everest Cycles Ltd. reported as (1984) 56 Comp Cases 16. His submission was that Section 58 read with Section 44-A of the CPC makes a foreign decree, a decree of this Court. However, in execution proceedings alone, the grounds mentioned in Section 13 could be looked into and not in a company petition. According to him, a decree must be enforceable because of the provisions of section 13 of the cpc but it would nevertheless constitute a “debt' and therefore, petition can be filed. His submission was that this action was based on a decree passed by a foreign Court the effect of which is:
(i) crystalizing the debt.
(ii) Creating new obligation between the parties and the moment these two aspects are satisfied, the petition would be maintainable.
8. He also tried to buttress this submission from a different angle. His contention was that a judgment would fall within the doctrine of estoppel and, therefore, the company was estopped from contending that no debt is due and for this submission, reliance was placed upon the judgments of the Allahabad High Court in the case of Mt. Wahidan v. Nasir Khan and another reported as AIR 1930 Allahabad 434 and of the Patna High Court in the case of Garaj Narain Singh v. Babulal Khemka reported as AIR 1975 Patna 58. He submitted that it was trite law that even if decree is not executed winding up order can be passed as held in Tube Investment of India Ltd.(supra).
9. The submission of Mr. Mohan, learned counsel for the company, on the other hand, was that section 44-a of the cpc requires foreign decree (subject to its legality and validity) to be executed in India by the executing court in the manner prescribed which is mandatory. Thus if a statute requires an act to be done in 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 v. K.M Abdul Kasim Co.. AIR 1964 Madras 221
(ii) Sheik Ali v. Sheik Mohamed. AIR 1967 Madras 45
(iii) Nazir Ahmad v. King-Emperor AIR 1936 Privy Council 253
(iv) Babu Verghese and others v. 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 and opposed to Indian law.
(d) obtained by fraud.
11. His submission was that had the petitioner filed execution petition under section 44-a of the cpc, the company could have demonstrated that such a foreign decree was not enforceable on any one or all the aforesaid grounds. How then it can be a legal and valid ‘debt’ payable by the company to the petitioner on the basis of which petitioner could file the petition, quipped the learned counsel.
12. Whether a decree constitutes a ‘debt’ is the first issue which would require determination. This aspect need not detain us for long in view of two pronouncements; one by the Bombay High Court in the case of Silver Shield Construction and Trading Ltd. (supra) and other by the Gauhati High Court in the case of Tube Investment of India Ltd.(supra). In the first case, an application for the execution of a foreign judgment was filed by a foreign company against an Indian company in terms of section 13 of the cpc. Subsequently a petition was also filed for winding up of the Indian company on the ground of its failure to discharge its debt under Section 434 of the Act. It was contended by the Indian company that unless its dispute about the validity of judgment was resolved, which could be done in execution application, the company petition was not maintainable since there was no ‘debt’ as such. This contention was negatived by the High Court holding that both the remedies, namely, execution of decree as well as winding up proceedings were available to a creditor and that the foreign company was also a creditor by virtue of the foreign decree in its favour which was a ‘debt’ within the meaning of Section 433 (e) of the Act so far as the Indian company was concerned. The relevant discussion on this aspect of the matter is found in the following passage from that judgment:
“It was firstly submitted by Mr. Dada, the learned counsel appearing for the company that the present petition was premature inasmuch as the petitioners has filed execution application in March 1992 and the issue as to the validity of the judgment is pending. It was the submission of Mr. Dada that the execution application being anterior in point of time, unless the issue of validity of decree was resolved, there was no failure to pay. On the other hand, Mr. Doctor, the learned counsel appearing for the petitioners, 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 Kumar5 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. [1987] 48 Comp Cas 231 and a decision in the case of Girish Bank Ltd. In re. AIR 1959 Cal 762. It was his further submission that under the provisions of the Companies Act, at the present stage there was no question of payment of the decretal amount and that only after the winding up order was made that under section 529 of the Act when Insolvency Rules are to apply, and after the provisions of section 529A of the Act are complied with and the preferential payments to workers and the secured creditors are made, that the question of payment would arise. I see some force in the submission made by Mr. Doctor. The authorities cited by Mr. Doctor clearly show that both the remedies are available. Not only that, but there is a decree which is passed in favour of the petitioners and the company's liability is, thus, crystallized. It is well settled that a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation. In my opinion, the debt has become due in the sense that the petitioner is entitled to claim its payment presently and, therefore, it is a ‘debt’ within the meaning of Section 433 (e) of the Act. Moreover, the petitioner is a ‘creditor’ by virtue of a decree having been passed in its favour and, therefore, entitled to file the present petition.”
13. Likewise, the Gauhati High Court in the case of Tube Investment of India Ltd.(supra) held that a decree holder has option to file petition for winding up without executing a decree, where a person holds a decree against the company it is not necessary that the decree should be executed before presentation of a winding up petition. The observations of the Gauhati High Court on the basis of which the aforesaid opinion was formulated are as under:
“The petitioners are judgment creditors. A creditor is a person who could enforce his claim against the company by an action of debt. They have obtained judgment against the company for an ascertained sum of money and the judgment itself created a debt entitling the petitioners to the petition for winding up. The fact that the decree may be executed in the civil court is not a sufficient ground for refusing a winding-up order. As has been held in Unique Cardboard Box Mfg. Co. Pvt. Ltd., In re [1978 41 Comp Cas 599 (Cal), it is not necessary that the decree should be executed before the presentation 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 apply to even a foreign decree. Consequentially, it would not be necessary to first await the outcome of the execution proceedings even when defence taken by the judgment debtor is that such a decree was not binding under section 13 of the cpc.
(e) It is not even necessary for a decree holder to file execution as well as winding up petition on the basis of a decree, he can file winding up petition without seeking execution.
15. While there is no difficulty in arriving at this conclusion, further question that needs determination is as to what would be the approach of the Company Judge when a winding petition based on a decree is filed. Whether, presuming the same to be a ‘debt’, the court has to come to a conclusion, almost as a matter of routine, that such a decree is ‘debt’ and further that the judgment debtor/company is unable to pay the debts since the same is not paid. Mr. Chandhiok, learned senior counsel appearing for the petitioner wants that this course of action should be adopted. On the other hand, Mr. Mohan, learned counsel appearing for the company enters caveat and submits that it is for this court to probe the matter further and examine as to whether such a decree is at all executable or not and, therefore, this court should determine this question on the touchstone of provisions contained in section 13 of the CPC.
16. Before answering this question, we may take note of some judgments, although not cited at the bar. These judgments are rendered by the High Court of Calcutta. First is the case of Mohamad Amin Bros. v. The Dominion of India reported as (54) 1949-5 0 Calcutta Weekly Notes 514. That was a case where Dominion of India filed winding up petition against a company for non-discharge of tax liability. The Company Court held such a petition as maintainable and admitted petition against which the company filed appeal. The two Judges of Division Bench viz. Chief Justice Harries and Justice Chatterjee, in their separate but concurring opinions first stated the established principle that a winding up petition is a legitimate method of enforcing payment of its debt. A petitioning creditor who cannot get paid a sum presently payable has, as against the company, a right ex debito justiue to a winding up order. It is a mode of execution which the court gives to a creditor when the company is unable to pay its debts. The Bench 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 687] it was held that whether upon the hearing of a winding-up petition presented by a judgment creditor evidence is before the Court upon which the issues of whether the judgment was or was not obtained by collusion can be decided the position will be forthwith disposed of, notwithstanding that the judgment has not been impeached in an action at law.
In this case the Court in considering whether it would make a winding-up order examined whether the judgment or decree was or was not obtained by collusion to ascertain whether there was a real debt upon which the petition for winding-up could be founded”
17. Second judgment is also of the Calcutta High Court in the case of Bajrangbali Engineering Co. Ltd. v. Amar Nath Sircar and others reported as (83) 1995 Comp Cases 435. In that case, the learned Company Judge had admitted the winding up petition and directed citations to be published. The petition was based on a decree. Interestingly, even the Company Judge was of the opinion that the Company Court was not to go by the decree blindly but required to examine the contention of the company/judgment debtor as to whether the grievance of the company that the judgment was obtained against him either by fraud or otherwise was genuine or not. It was also observed that whether there is an initial lack of jurisdiction in passing a decree, winding up court had wide powers than the ordinary courts to travel behind the decree to find out whether the decree on which the winding up petition is based was properly obtained. Thus, after going into the question the Company Judge found that the decree was validly obtained by the petitioning creditor and, therefore, ordered admission of the petition. In appeal, the Division Bench set aside the order of admission as well while maintaining the undeniable proposition of law that winding up courts had right to go behind the decree. It would be for our benefit to quote the discussion on this aspect from this judgment rendered by the Division Bench:
“Mr. P.K Das, appearing for the company appellant while challenging the order of admission of the winding up petition in the court below, has cited several decisions for the proposition that the existence of a money decree is not necessarily conclusive for the company court to proceed query to be raised thereupon. The following cases were cited in this regard:
Ko Ku La Ltd., 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 justice might, according to the winding-up court, occur, if the decretal debts were permitted to be used as a tool for winding up.
Bankruptcy courts and winding-up courts are courts of representative action. Individual interests are adjudged not in isolation but as having a bearing upon other interests too, not all of which are at all times represented before the court judging the particular matter in hand. The official liquidator, the principal subordinate officer of the company court, does not admit to proof decretal debts which might have been collusively suffered by the company for unwarranted gain of the corporate managers of official liquidator can disallow a debt which has been treated by the company court itself as so indisputable as to cause the admission and advertisement of a winding up petition. Thus, the company court scrutinizes with double caution the debt which is to be the beginning of the end.
It has been held in Fraser, In re [1892] 2 QB 633 that even if an application to have a judgment in a civil suit set aside has been refused, and the said refusal has been affirmed in the Court of Appeal, even in that case, the decretal dues can be gone behind by the company court. So also in the case of even a consent judgment in Lennox, In re [1885] 16 QBD 315. It has also been held that even in unconditional leave to defend an action has been granted, the company court might yet admit a winding-up application on the said same debt; Welsh Brick Industries Ltd., In re [1946] 2 All ER 197(CA).
The position at law well settled both in England and in India, therefore, is that a winding-up court on its own goes behind the decree in the aforesaid serious circumstances, and if it is itself dissatisfied, then it does not permit a winding-up application to proceed, leaving the parties to work out their rights in execution proceedings in the ordinary civil courts.”
18. From the reproduction of the aforesaid passage, it can clearly be found out that these observations are made after taking into consideration various judgments pronounced by different Courts.
19. With respect, I am in complete agreement with the proposition of law laid down in the aforesaid judgments. Once this is to be accepted as the principle of law, the argument of learned senior counsel for the petitioner that the present petition be admitted without making any further probe, 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 petition was admitted. As saying the law in the aforesaid perspective, questions formulated above can be answered as under:
Winding up petition filed on the basis of a foreign decree would be maintainable. It is not necessary for a decree holder, in possession of a foreign decree, to first execute the decree by filing execution and get the validity of such a decree determined on the touchstone of section 13 of the cpc. However, it is not to say that when such a petition is filed, the court is precluded from making any further probe and proceed on the assumption that the debt is payable on the basis of the said decree. Rather, in such proceedings, it would be open to the company to show that even if it is a ‘debt’ the same is disputed bonafide. Debt payable under a decree can be challenged on the plea that the decree is obtained by fraud etc. As a sequittar when decree is passed by a foreign court, the judgment debtor/company will have right to demonstrate that such a decree is obtained by fraud or is not binding as it offends any of the provisos contained in section 13 of the cpc. If the argument of learned senior counsel for the petitioner is accepted, it can have far-reaching consequences and the provision for winding up could be misused by obtaining a decree fraudulently, not getting it executed and filing winding up petition and converting it to a coercive mean of extracting money which may otherwise be not payable. Necessarily, therefore, the petitioning creditor will have to meet the challenge of the judgment debtor/company when validity of the said decree is questioned on such grounds. I may hasten to and that it is not that while examining such issue, frivolity of the respondent company is to be entertained. However, the minimum which the Company Court would be required to do is to test the defence/submission of the company from the point of view germane to these proceedings, namely, whether the debt is disputed on bonafide grounds. In the context of a foreign decree, that would mean going into the said decree with reference to section 13 of the cpc to find out whether only plausible defence is raised which needs examination. Otherwise, the effect would be to shut the very remedy available to such judgment debtor if execution petition is filed and it would lead to denial of natural justice.
20. After delineating the proposition of law in 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. There is nothing on record to show that the London court had a requisite territorial jurisdiction to entertain the suit. It was deciding lis between the two parties and it was necessary to demonstrate that over the company in question, it had requisite territorial jurisdiction. The London court could be vested with jurisdiction only if the petitioner could show that cause of action had arisen in London or that the company had submitted to the jurisdiction of London court. However, on the company's refusal to participate the decree came to be passed by passing the following brief order:
“No notice of intention to defend having been given by the Defendants herein and the Writ having been served in India in accordance with the Order of Master Trench dated 14th January 1993 it is this day adjudged that the Defendants do pay the Plaintiffs United States dollars $ 879.750.00 or the sterling equivalent at the time of payment and interest thereon to be assessed and costs to be taxed.”
22. This order does not appear to be on the merits of the case. Learned senior counsel for the petitioner submitted that the suit was in the nature of summary suit (like suit under Order XXXVII CPC in India) and, therefore, when the company did not put up any defence such a decree could be given and it cannot be said that it opposed to public policy. I am not persuaded by this argument. The case filed by the petitioner was for grant of damages which the petitioner was claiming on the ground that the company had committed breach of contract between the parties. It was not the case of the petitioner that there were any pre-determined or liquidated damages prescribed for such a breach. The petitioner was obligated to prove these damages and only such damages could be awarded which could be proved by leading appropriate evidence and the court record following findings;
(i) Repudiation of the agreement by the company amounted to breach of contract. For this another finding which was necessary was that there was no force in the contention of the company that the contract had become impossible of performance.
(ii) As a result of breach, the petitioner had suffered losses.
(iii) It had to prove the quantum of loss.
[Ref: Union Of India v. Raman Iron Foundry ., (1974) 2 SCC 231]
23. Even in ex-parte proceedings, the plaintiff is required to substantiate its claim by leading appropriate 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 tentative observations, I am of the opinion that dispute raised by the respondent company about the validity of such a decree is not a sham dispute. The respondent company has questioned the decree on substantial ground which needs probe. It would be more appropriate for the petitioner to file execution proceedings under Section 44-A CPC so that the validity of the decree is tested finally after recording the evidence, and with reference to Section 13 CPC.
25. The petition is dismissed. No costs.
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