A foreign decree, whether from a reciprocating or non-reciprocating territory, must satisfy the tests of Section 13 of the CPC to be considered a 'debt' for the purposes of a winding up petition under the Companies Act, 1956.

G.S. Patel, J.

1. Is an ex-parte default summary judgment obtained in a non-reciprocating foreign country against an Indian company a ‘debt’ due and payable by it within the meaning of Section 433(e) of the Companies Act, 1956? This is the issue in this winding up petition.

2. The petitioner, Marine Geotechnics LLC (“Marine Geotechnics”) is an American company. It has its headquarters in Houston, Texas. It brought suit against the respondent-Company, Coastal Marine Construction & Engineering Ltd. (“Coastal Marine”) in the United State District Court, Southern District of Texas, Houston Division. Marine Geotechnics filed a Motion for Entry of Default Judgment against Coastal Marine and three others. On 18 January 2011, the US District Court granted Marine Geotechnics’ motion and entered default judgment against Coastal Marine and one of the other defendants. A copy of that opinion/judgment is annexed to the affidavit in rejoinder. The order is composite. Against two other defendants it obtained a summary default judgment. Against Coastal Marine and one other defendant it obtained a default judgment. The total amount decreed is in the aggregate sum of US$ 432,731.28.

3. Marine Geotechnics’ lawyers issued a statutory notice to Coastal Marine on 15 September 2012. Coastal Marine’s advocates replied on 8 October 2012 denying liability, saying that Coastal Marine was unaware of any such decree. Marine Geotechnics’ advocates responded on 20 October 2012.

4. Mr. Narula for the petitioner, Marine Geotechnics, submits that there is no defence to the petition. There is, he says, a valid decree against Coastal Marine, and it has not been satisfied despite service of a statutory notice. Coastal Marine must be deemed to be unable to pay its debts within the meaning of Section 434(1)(a) of the Companies Act, 1956. In any case, he says, Coastal Marine has liabilities in excess of Rs.26 crores and is commercially insolvent.

5. Mr. Sheth, appearing for Coastal Marine, disputes it liability altogether. Coastal Marine was, he says, never served with a writ of summons (or its equivalent). There is no evidence of service. The default judgment of the US District Court is just that: an ex-parte default summary decree against Coastal Marine since it did not appear. Mr. Narula’s attempt at this sage to produce proof of service is not something that I can or am willing to examine; certainly there is nothing on affidavit to demonstrate service. The document Mr. Narula produces is also not one that I can accept like this at its face.

6. Even if there was any such evidence, I doubt it would assist Mr. Narula much. Mr. Sheth’s submission is that this is ostensibly a decree or a judgment of a foreign court in a non-reciprocating territory. Under Section 13 of the Code of Civil Procedure, 1908 (“CPC”), the judgment on which this decree is based is conclusive, but only if it satisfies the tests of that section. That means that the decree is no debt till it is made a rule of a court in India, and that, he says, can only be done once the Marine Geotechnics files a suit on that judgment and brings it within the parameters of Section 13. Until that time, Mr. Sheth submits, the judgment of the US District Court is not a ‘debt’ within the meaning of Section 433(e) of the Companies Act, 1956 sufficient to provide a foundation for a winding up action.

7. Mr. Narula relies, first, on the decision of a single Judge of this Court in China Shipping Development Co. Ltd. vs. Lanyard Foods Ltd. [2008] 142 Comp Cas 647 (Bom); 2007 (5) Bom CR 684) There, in a case of affreightment, four letters of indemnity were said to have been issued by the respondent-company jointly and severally with the State Bank of Saurashtra. The petitioner having delivered the cargo at the respondent-company’s request, the petitioner incurred liabilities to third parties who claimed they were lawful holders of one or more of the bills of lading in question. Legal proceedings were initiated against