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IN THE HIGH COURT AT CALCUTTA
SHAMPA SARKAR, J.
Uphealth Holdings, INC. - Petitioner
Versus
Dr. Syed Sabahat Azim & Ors. - Opposite Parties
C.O. No. 241 of 2024
Decided On : 22-05-2024
Comity - Anti-Arbitration Suit - CPC Sections 9, 10, 13, 14, 44A; Arbitration and Conciliation Act Section 45 - The court discussed the applicability of foreign moratoriums and the doctrine of comity, concluding that Indian courts are not bound to stay proceedings based on foreign bankruptcy orders unless there is reciprocity recognized by law.
Fact of the Case:
The petitioner filed an anti-arbitration suit while a U.S. Bankruptcy Court had issued a moratorium. The petitioner sought to stay the Indian proceedings based on this foreign order, arguing for recognition under the doctrine of comity.
Finding of the Court:
The court found that the U.S. Bankruptcy Court's moratorium was not automatically enforceable in India due to lack of reciprocity and that the Indian court was not bound to stay the suit merely because of ongoing foreign proceedings.
Issues: Whether the Indian court should stay proceedings based on a foreign bankruptcy moratorium and the applicability of the doctrine of comity in this context.
Ratio Decidendi: The court held that the principles of comity do not mandate staying domestic proceedings in light of foreign orders unless there is a recognized legal framework for such enforcement.
Result: The revisional application is dismissed; the suit will proceed.
Key Points: - Indian courts are not obligated to recognize foreign bankruptcy moratoriums without established reciprocity (!) (!) . - The doctrine of comity does not mandate staying domestic proceedings based on foreign orders unless there is a recognized legal framework for such enforcement (!) (!) (!) . - The enforceability of foreign decrees or orders in India depends on reciprocity, as outlined in Section 44A of the Code of Civil Procedure (!) (!) (!) (!) . - For non-reciprocal nations, enforcement of foreign orders requires filing a regular suit under Sections 13 and 14 of the Code of Civil Procedure (!) . - The pendency of a suit in a foreign court does not automatically preclude Indian courts from trying a suit founded on the same cause of action (!) (!) . - Foreign judgments relied upon were primarily in respect of insolvency proceedings, and the current suit did not fall under those categories (!) . - The U.S. Bankruptcy Court's moratorium order was not automatically enforceable in India due to the lack of declared reciprocity (!) . - The suit filed was an anti-arbitration suit seeking declarations and injunctions, not a money claim or claim covered by Chapter 11 of the U.S. Bankruptcy Code (!) (!) . - The moratorium order of the U.S. Bankruptcy Court was not a pre-existing order at the time of the suit's hearing and did not bind the Indian court to stay the suit (!) . - The revisional application was dismissed, and the suit was allowed to proceed (!) .
JUDGMENT :
Shampa Sarkar, J.
1. The revisional application is directed against an order dated January 17, 2024, passed by the Learned Commercial Judge at Rajarhat, North 24, Parganas, in Title Suit No. 17 of 2023.
2. Title Suit. No. 17 of 2023 is an anti-arbitration suit. During the pendency of the said suit, the petitioner/defendant No.1 filed an application under Section 151 of the Code of Civil Procedure, 1908, (hereinafter referred to as the said application) with a prayer for stay of further proceedings of the suit, with liberty to mention, upon expiry of the moratorium in the U.S. Bankruptcy proceeding. In the alternative, prayer was made for adjournment of the said suit for 180 days.
3. The learned Judge rejected the said application, inter alia, holding that the moratorium order of the U.S Bankruptcy Court was not applicable in India. U.S.A had not been declared as a reciprocating territory for the purpose of Section 44A Code of Civil Procedure. The learned court further held that although the moratorium order of the U.S Bankruptcy Court was quite akin to Section 14 of the Indian Bankruptcy Code, 2016 (IBC 2016), but the IBC 2016 was only applicable within the territory of India. In the absence of a Central Government notification in the Official Gazette declaring U.S.A to be a reciprocating territory, the moratorium order would not be automatically enforceable under Section 44A Code of Civil Procedure. The provisions of Section 13 and 14 of the Code of Civil Procedure, were also not applicable in the present factual matrix because the bankruptcy order was not passed in a proceeding between the parties to the suit. The said order of the learned Trial Judge has been assailed on various grounds.
4. The petitioner/defendant No.1, appeared and filed an application under Section 45 of the Arbitration and Conciliation Act, 1993. Prayer was made for an order to refer the parties to arbitration. When the suit was at the stage of hearing of the application under Section 45, the petitioner/defendant No. 1, filed the said application and prayed for the following reliefs:-
“(a) A direction to stay further proceedings in the present suit with a liberty to mention, post expiry of the moratorium in the U.S. Bankruptcy Proceedings; or
(b) In the alternative, adjourn the proceedings in the present Anti-Arbitration Suit for 180 days.
(c) Costs.
(d) Pass such further and/or other orders as this Learned Court may deem fit and proper;”
5. According to the petitioner/defendant No. 1, the suit should have been stayed or in the alternative, adjourned at least for 180 days, until the expiry of the moratorium in the U.S. Bankruptcy proceeding. The specific contention of the petitioner was that the order dated October 24, 2023, issued by the Bankruptcy Court of the District of Delaware U.S., under Chapter 11 of the U.S. Bankruptcy Code (hereinafter referred as the said Code), operated as a worldwide temporary stay. As per Section 362 of Chapter 11 of the said Code, the Title Suit could not proceed against the defendants. Chapter 11 of the said Code, governed Corporate Restructuring in the U.S.A. The provisions had been recognized by the Apex Court in various decisions. The proceeding before the U.S. Court was akin to the Corporate Insolvency Resolution Process in India, under IBC 2016, more particularly Section 14 thereof. Section 14 of the IBC 2016 also imposed a moratorium in respect of a corporate debtor. Thus, the Chapter 11 proceeding initiated for asset preservation, had triggered an automatic stay on all legal actions against the petitioner in terms of Section 362 of the said Code. The order also directed the petitioner to take and perform all necessary actions in order to implement and effectuate the relief granted. Accordingly, the learned Trial Court was approached for implementation of the order of stay. The doctrine of Comity of Courts required that courts of one nation or jurisdiction should respect and recognize the decisions rendered by com
AI
The judgment emphasizes the need for expert opinion on foreign law, respect for foreign judgments, and the maintainability of commercial suits under the Commercial Courts Act.
“Judgment” as per Section 2(9) of CPC means statement given by Judge on grounds of a decree or order.
Execution under CPC Section 44A for reciprocating territory decrees involves summary Section 13 inquiry; framing issues and evidence allowed only in exceptional circumstances like doubts on service, ....
Courts can respect foreign bankruptcy judgments, but they must also adhere to local laws on fraud and property transfer standards.
The execution of foreign decrees from reciprocating territories requires a swift process; however, exceptional circumstances may necessitate the framing of issues and consideration of evidence in det....
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