Supreme Court holds enforcement of foreign judgment under Section 13 CPC fails when summary judgment denies fair trial on triable issues.

Held: The Supreme Court held that a foreign judgment cannot be enforced in India under Section 44A CPC if it falls within the exceptions under Section 13 CPC. The Court held that where a foreign court converts a default judgment into a summary judgment and refuses leave to defend despite bona fide triable issues supported by contemporaneous documents, the judgment cannot be treated as one delivered on merits and is also opposed to natural justice. The Court further clarified that under Section 47 of the repealed FERA regime, there was no bar on bringing legal proceedings in India to determine liability, but actual enforcement of the decree requiring foreign exchange remittance would be subject to prior permission of the Central Government/RBI.

Summary: The dispute arose from a Share Purchase and Co-operation Agreement between Messer Griesheim GmbH and Goyal MG Gases Private Limited for a joint venture in India. The respondent obtained an External Commercial Borrowing facility from Citibank UK, with the appellant standing as guarantor, after approvals from the Government of India and the RBI under FERA. When the respondent allegedly defaulted, the lender invoked the guarantee and the appellant paid USD 4.78 million, later claiming reimbursement by subrogation. The appellant first obtained a default judgment from the English Court and then, after facing objections to enforceability in India, sought to set aside the default judgment and obtain a summary judgment. The respondent resisted, relying on alleged oral agreements, balance sheets, minutes of board meetings, nominee-director participation and correspondence showing that the appellant’s payment was treated as an adjustment against claims of the respondent. The English Court nevertheless granted summary judgment. The Supreme Court held that these materials disclosed realistic and not fanciful defences requiring fuller trial, oral evidence and cross-examination. It therefore upheld the Delhi High Court Division Bench’s refusal to enforce the English judgment, though for partly distinct reasons.

Decision: The Supreme Court dismissed the appeal and held that the English Court judgment was not enforceable in India under Section 44A CPC because it failed the substantive tests under Section 13(b), 13(c), 13(d) and 13(f) CPC. The Court held that the foreign judgment was not on merits, was opposed to natural justice, failed to recognise relevant Indian foreign exchange law, and sustained a claim contrary to binding statutory conditions. However, the Court clarified that the English Court did have jurisdiction and that no case of fraud under Section 13(e) CPC was made out. The appeal was dismissed with no order as to costs.