Are Indian Companies bound by Decrees of US Courts?

‘A’ Company Ltd. is a company registered under the Companies Act, 1956.  Mr. X holds jointly with his wife, 1000 shares in ‘A’ Company Ltd.  Mr. X is resident in USA and has taken a divorce decree from a US Court.  As per the decree, the property in India is granted to the husband.  Based on the said decree, the husband has applied for removal of the name of his ex-wife as a joint shareholder from the register of members of ‘A’ Company Ltd.

Issues:

1. Is the decree issued by a US Court valid in India?

2. Can ‘A’ Company Ltd., relying on such foreign decree, remove the name of ex-wife of Mr. X as the joint shareholder from its register of members?

Code of Civil Procedure, 1908 sets the general parameters in relation to foreign courts and their judgments. That statute reads in pertinent parts as under:

Clause (5) of Section 2 of the Code of Civil Procedure, 1908 defines 'foreign court' as follows:

“"foreign Court" means a Court situate outside India and not established or continued by the authority of the Central Government.”

Clause (6) of Section 2 of the Code of Civil Procedure, 1908 defines 'foreign judgment' as follows:

“"foreign judgment" means the judgment of a foreign Court.”

“A foreign judgment would mean adjudication by a foreign court upon the matter before it” and not merely a statement of reasons for the order. [Brijlal v. Govind AIR 1947 PC 192]  A suit on a foreign judgment is governed by Section 13 of the Code of Civil Procedure, 1908.  Section 13 provides as to when a foreign judgment is not conclusive. It reads as follows:

“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 recognize 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.

Section 14 of the Code of Civil Procedure, 1908 provides for the Presumption as to foreign judgments. It reads as follows:

“The Court shall presume upon the production of any document purporting to be a certified copy of a foreign judgment that such judgment was pronounced by a Court of competent jurisdiction, unless the contrary appears on the record; but such presumption may be displaced by proving want of jurisdiction.”

Thus, Sections 13 and 14 of the Code of Civil Procedure, 1908 enact a rule of res judicata in case of foreign judgments. These provisions embody the principle of private international law that a judgment delivered by a foreign court of competent jurisdiction can be enforced by an Indian court and will operate as res judicata between the parties thereto except in the cases mentioned in Section 13 herein above. As such the decree issued by the United States of America is valid in India.

Accordingly, Issue No.1 is addressed.

Section 44A of the Code of Civil Procedure, 1908 deals with the Execution of decrees passed by Courts in reciprocating territory.

“44A. Execution of decrees passed by Courts in reciprocating territory.

(1) Where a certified copy of decree of any of the superior Courts of any reciprocating territory has been filed in a District Court, the decree may be executed in India as if it had been passed by the District Court.

(2) Together with the certified copy of the decree shall be filed a certificate from such superior Court stating the extent, if any, to which the decree has been satisfied or adjusted and such certificate shall, for the purposes of proceedings under this section, be conclusive proof of the extent of such satisfaction or adjustment.

(3) The provisions of section 47 shall as from the filing of the certified copy of the decree apply to the proceedings of a District Court executing a decree under this section, and the District Court shall refuse execution of any such decree, if it is shown to the satisfaction of the Court that the decree falls within any of the exceptions specified in clauses (a) to (f) of section 13.

Explanation 1- "Reciprocating territory" means any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of this section; and "superior Courts", with reference to any such territory, means such Courts as may be specified in the said notification.

Explanation 2.- "Decree" with reference to a superior Court means any decree or judgment of such Court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of a like nature or in respect to a fine or other penalty, but shall in no case include an arbitration award, even if such an award is enforceable as a decree or judgment.”

Therefore, it follows from the above that a foreign judgment can be enforced in India in one of the two ways: 1) Judgments from Courts in "reciprocating territories" can be enforced directly by filing before an Indian Court an Execution Decree. A "reciprocating territory" is defined in explanation 1 to Section 44A of Code of Civil Procedure, 1908 as: "Any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare as a reciprocating territory." Presently, the United States of America is not declared as a "reciprocating territory" by the Government of India. 2) Judgments from "non-reciprocating territories," such as the United States, can be enforced only by filing a law suit in an Indian Court for a Judgment based on the foreign judgment. The foreign judgment is considered evidentiary.

In view of the above legal position, Mr. X has to file a suit in the Indian Court of competent jurisdiction based on the foreign decree which will have evidentiary value and obtain a decree whereupon he should file an execution petition and obtain execution decree. Based upon such execution decree, Mr. X can then approach ‘A’ Company Ltd. to give effect the orders contained therein. Therefore, ‘A’ Company Ltd. cannot remove the name of ex-wife of Mr. X as the joint shareholder from its register of members merely based on the decree of US Court.

Accordingly, Issue No. 2 stands addressed.