Foreign Judgement – Insolvency proceedings – Initiation of in India directly without any testing or filtration provided in CPC for execution of foreign decree in India – Not permissible: [Code of Civil Procedure 1908 section. 13, 14, 44A].

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Abraaj Investment Management Ltd vs. Neville Tuli & Ors. AIR 2013 (NOC) 91 (Bom.)

The CPC provides specific provisions for execution of the decree passed by the court in reciprocating territory. The reciprocating territory means the territory as is defined u/s. 44-A of the CPC. It is clear even from the specific provision that any foreign judgment or decree cannot be put for execution unless there is reciprocating agreement or treaty as contemplated. The national or international treaties and or conventions and or agreements have their own value for the purposes of inter-border transactions and various such jurisdictional aspects. Everything is under control of the respective provisions of the respective States and the countries. Nothing is free and or no one can take any steps in any country without the sanction/ permission and or the filtrations so contemplated under the respective acts of the country. Section 13 of CPC contemplates when a foreign judgment shall be conclusive so that appropriate suits and or proceedings can be initiated by the concerned court/ parties in India. It provides the procedure to be followed before accepting the foreign judgment’s conclusiveness. It also means the merits of such judgments. Section 14 of CPC contemplates presumption so far as the foreign judgments are concerned. Section 114 of the Evidence Act deals with the presumptive value, even of the foreign judgment. The concept of presumption itself means that it is always rebuttable if a case is made out. Therefore, merely because it is a foreign judgment and or decree, that itself is not conclusive judgment for the purpose of final execution in India. Both required pre-testing or pre-filtrations as provided under the CPC and other relevant laws and rules. There are no provisions whereby any party/person can directly invoke the insolvency Act, based upon such foreign ex-parte judgment/decree. Even the foreign award cannot be executed in such fashion in India. It is also subject to the procedural filtration and the challenge.

The concept of execution of any decree and or order is different than initiation of the insolvency action based upon the decree or order. If these two concepts are totally different then it is difficult to accept the submission that for the initiation of the insolvency proceedings, no steps or permission and or the filtrations is necessary, as there are no specific boundaries or rules to restrict the same.

Once the insolvency notice is issued and if not complied with, the consequences are quite disastrous. The Insolvency Act provides various consequences in case the party in spite of service of insolvency notice failed to comply with the same. The act of insolvency in the commercial world has its own effect to destroy and or hamper the name, fame and the market and the business. Once the act of insolvency is committed, the declaration will be “for all the debtors” though action was initiated by the party for recovery of their respective monetary claims. The concept of “action in rem” and its effect just cannot be overlooked even at this stage, while considering the scheme of the insolvency Act.

In view of the Insolvency Act, the officer/official assignee based upon the averments made by the decree holder and believing the certified copies and or copies of the foreign judgment and or decree thought it to be correct and binding even on merit and issued the insolvency notice. The debtor after receipt of the same if failed to comply with the same, asked to face the consequences. For execution of a foreign decree, the filtration is provided and it is difficult for the party to execute the foreign judgment and or decree in India without following the procedure of law how the official assignee can initiate insolvency notice straightway on the basis of such foreign judgment by treating the same to be a final decree or order passed by the foreign court. Admittedly, there is nothing under the Insolvency Act and or CPC which permit and or entitles any one to put such foreign decree or judgment as the basis for initiating the insolvency proceedings in such fashion. If there are no provisions there is no permission. The Indian Court under the Insolvency Act is not empowered and or authorised to initiate insolvency proceedings in such fashion directly on the basis of the foreign judgment and or order.

The Court observed that such initiation of insolvency proceedings based upon a foreign judgment and or decree directly without any testing and or filtration as available for execution of the foreign decree in India will create more complications because of its various multifaceted problems and the situations. The initiation of such proceedings itself is not sufficient.