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Informist, Wednesday, Apr. 22, 2026

 

NEW DELHI – The Supreme Court has held that foreign decrees are enforceable in India if they comply with Section 13 of the Code of Civil Procedure, 1908, which means the verdict is delivered through a competent jurisdiction, follows the merits and principles of natural justice, and not obtained by fraud. However, the central government or the Reserve Bank of India can exercise its regulatory power under the erstwhile Foreign Exchange Regulation Act, 1973 and grant approval before any further steps are taken for enforcing the foreign award, said the court.

 

The top court said there is no prohibition for initiation of proceedings and for determination of liability with respect to foreign decrees. However, after obtaining a declaration for its implementation, obtaining permission from the RBI is "sine qua non," said the court. In other words, without RBI approval, it is not possible to take steps for enforcement of a foreign decree in India under the erstwhile 1973 Act.

 

According to Section 47(3)(b) of the 1973 Act, no steps shall be taken by any party for the purpose of enforcing any foreign judgment or order except as the RBI may permit. The Foreign Exchange Regulation Act was replaced by the Foreign Exchange Management Act, 1999, which came into force in 2000. The top court was dealing with the issue in a case which related to the previous law on foreign exchange regulation.

 

The apex court refused to enforce a foreign judgment passed by an English Court asking Goyal MG Gases Pvt. Ltd. to pay $5.8 million and 31,364 euros, along with interest and cost of 90,000 pound sterling to Air Liquide Deutschland Gmbh. The adjudication by way of summary judgment by the English Court in the presence of bona fide triable issue meant that the decree passed was not on merits within the meaning of Section 13(b) of the 1908 Code, said the top court.

 

Further, the English Court had failed to give due effect to statutory permissions and conditions imposed under Indian foreign exchange law, said the court. Despite triable issues, the Indian company was not allowed to defend its case, which was against the Code of Civil Procedure, said the top court.

 

The case is with regard to a share purchase and cooperation agreement executed between Air Liquide and Goyal MG in 1995, for establishing a joint venture company in India for manufacturing and conducting business in industrial gases. Thereafter, Goyal MG executed a loan agreement with Citibank N.A., London and Air Liquide irrevocably and unconditionally guaranteed the due repayment.

 

In 1997, the RBI permitted Air Liquide to furnish a guarantee with conditions such as that there was no outgoing of foreign exchange by way of any fee, direct or indirect, for the proposed guarantee and, in case of invocation of the guarantee, no liability whatsoever will extend to the Indian company.

 

In 2001, Citibank invoked the guarantee against Air Liquide due to default in repayment by Goyal MG. Air Liquide promptly discharged the outstanding liability and demanded reimbursement from Goyal MG by invoking the subrogation clause of the loan agreement. Goyal MG failed to make payment and asserted that the amount paid was in partial discharge of other liabilities owed by Air Liquide to the former and not under subrogation right.

 

In 2006, the English Court passed a verdict asking Goyal MG to pay the amount to Air Liquide. Seeking enforcement of the foreign decree, Air Liquide moved the Delhi High Court and then the apex court.  End

 

Reported by Surya Tripathi

Edited by Ashish Shirke

 

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