Conclusiveness Of Foreign Judgment For Enforcement In India

In terms of Section 44A of the CPC, a foreign judgment/ decree of any of the superior Courts of any reciprocating territory may be executed in India as if it had been passed by a District Court in India.

By way of background, United Kingdom of Great Britain and Northern Ireland has been notified as a ‘reciprocating territory’, whereas the High Courts of England have been notified as a ‘superior court’ by means of Notification No. F. 34-I/52-L dated March 01, 1953 passed by the Government of India in exercise of the power conferred by Explanation 1 to Section 44A of the CPC. Further, United Arab Emirates, Hong Kong, New Zealand, the Cook Islands (including Niue) and the Trust Territories of Western Samoa, Singapore, Fiji, Malaysia, Trinidad and Tobago, Papua and New Guinea, Bangladesh have also been notified as reciprocating territories to facilitate execution of decrees passed by the superior Courts of such countries.

In recognition of this reciprocal arrangement and after testing the foreign judgment on the principles of Section 13 of the CPC, the High Court of Delhi found the foreign judgment for decretal amount of USD 47 Million to be conclusive and executable in India against Mr. Gaurav Dhawan.

Mr. Dhawan, a person of Indian origin and presently a Maltese citizen, is the executive chairman and majority shareholder of Phoenix Group, which was one of the world’s top rice traders, reportedly owing around USD 1.2 Billion to creditors.

Case Highlights

The dispute arises out of credit facilities granted to Phoenix Global DMCC (based in UAE) and Phoenix Commodities Private Limited (based in BVI) (collectively “Borrowers”). The said facilities were inter alia secured by way of a personal guarantee(s) furnished by Mr. Dhawan.

Upon occurrence of default in repayment, the lenders were constrained to approach the High Court of Justice Business and Property Courts of England and Wales Commercial Court (QBD) (“High Court of England”) and file a claim against the Borrowers and Mr. Dhawan. Despite multiple rounds of service, the opposite parties did not enter appearance and the matters progressed exparte. Thereafter, upon examination of the documents and other evidence, the High Court of England pronounced a detailed judgment on merits awarding a decretal amount of USD 47 Million in favour of the lenders and against Mr. Dhawan as the Borrowers were already under liquidation at that stage (“Foreign Judgment”).

Proceedings before the High Court of Delhi -

Taking recourse to the reciprocal arrangement, TransAsia Private Capital Limited (based in Hong Kong) (“TransAsia”) filed an execution petition before the High Court of Delhi at New Delhi as a Decree Holder for enforcement of the exparte Foreign Judgment against Mr. Dhawan.

Upon registration of the proceedings, the High Court of Delhi granted exparte interim orders for injunction over Mr. Dhawan’s assets pending the adjudication of the execution petition. This was one of the few cases wherein the requirement of issuance of notice in cases of foreign judgment under Order XXI Rule 22 of the CPC was dispensed with by the High Court of Delhi in exercise of its discretionary powers. Accordingly, an exparte order was granted to safeguard the rights of the Decree Holder and maintain status quo.

Subsequently, Mr. Dhawan entered appearance and contested the proceedings by filing a review petition as well as an appeal to challenge the interim orders for injunction, however, the same was affirmed in favour of TransAsia.

Mr. Dhawan also filed objections to the execution petition inter alia on the ground that the Foreign Judgment was not conclusive under Section 13 of the CPC and hence not liable to be enforced in India.

According to Section 13 of the CPC, a foreign judgment will be inconclusive if it:

• is pronounced by a court that was not of competent jurisdiction;
• is not given on the merits of the case;
• appears to be founded on an incorrect view of international law or a refusal to recognize Indian law (where applicable);
• violates principles of natural justice;
• is obtained by fraud; or
• sustains a claim founded on a breach of Indian law.

Findings of the High Court of Delhi -

While adjudicating upon the said objections, the High Court of Delhi tested the Foreign Judgment on the principles of Section 13 of the CPC and inter alia came to the conclusion that:

• The High Court of England was a court of competent jurisdiction in view of the ‘asymmetric jurisdiction clauses’ incorporated in the personal guarantees furnished by Mr. Dhawan;
• Despite being exparte, the Foreign Judgment was given on merits of the case and upon taking into consideration the evidence that was placed before it; and

• Mr. Dhawan was duly served in accordance with the law as applicable in the United Kingdom and this the proceedings were not opposed to natural justice.

In view of the above, the High Court of Delhi, by way of order dated April 06, 2023, held that the Foreign Judgment is conclusive and does not fall within the exceptions carved out in Section 13 of the CPC. Accordingly, the objections raised by Mr. Dhawan were dismissed and the execution petition was listed for further consideration.

Key Takeaways -

In the era of increasing global transactions, the recognition of foreign judgments is another step by the Indian judiciary to protect the rights of foreign lenders in India. Such an approach and support has built confidence in foreign lenders and acts as a deterrent to borrowers who attempt to dishonor their obligations towards the creditors and/ or evade the jurisdiction upon occurrence of default.

TransAsia Private Capital Limited was represented before the High Court of Delhi by Dua Associates’ team led by Mr. Rajdeep Panda (Partner), and comprising of Mr. Chitranshul A. Sinha (Partner), Ms. Akshita Upadhyay (Associate), and Mr. Jaskaran S. Bhatia (Associate).

Click here to read/download the order