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GAUHATI HIGH COURT
Hrishikesh Roy, J.
California Pacific Trading Corporation —Petitioner
versus
Kitply Industries Ltd. —Respondent
Company Petition No. 10 of 2002
Decided on 2.5.2011
(ii) Civil Procedure Code, 1908— Section 13—Foreign judgment—To be conclusive—Must be rendered by a competent Court both by law of State and in an international sense—Foreign Court must be a Court of competent jurisdiction—Foreign judgment, enforceable and conclusive subject to exceptions enumerated in Section 13 of CPC. (Para 8)
(iii) Contract Act, 1872— Section 17—Civil Procedure Code, 1908— Section 13(e) —Certificates of Inspection—Non-disclosure of—Certificates of inspection on quality of goods given by president of plaintiff at preshipment stage—Not disclosed—Decree of North Carolina Court hit by Section 13(e) of CPC. (Para 14)
(iv) Civil Procedure Code, 1908—Section 13—Jurisdiction of Court—A contract—Jurisdiction depend on situs of contract and cause of action arising through connecting factors—Suit for damage/breach of contract—Making of an offer at a particular place not forms cause of action—Respondent-Company registered in India with its principal place of business at Calcutta—Situs of contract and delivery of goods and breach if any occurred at Calcutta—Defendant Company, a resident of north Colifornia District of time of commencement of suit—North Corolina Court had no jurisdiction to try a suit for damages against an Indian Company—Defendant merely questioned Territorial jurisdiction of trial Court—Not acquired and wired their right to contest issue of jurisdiction of U.S. Court—Contrary conclusion of warier reached by North Carolina Court erroneous—No cause of action disclosed against defendant—Territorial jurisdiction of U.S. Court not attracted against defendant Company. (Paras 11.1 to 12.3)
(v) Indian Contract Act, 1872— Section 73—Damages—Quantification of damages—Oral statement on damages cannot be made basis for—Defendants not aware of any future contract of plaintiff with its customers—Making defendant liable for alleged loss of future business suffered by plaintiff, unreasonable—Claim remote and indirect—Quantification of damages made by Court without any acceptable evidence on record—Claimed loss suffered by plaintiff given on conjectures and surmises—North Carolina Court not given its judgment on merits of case. (Paras 16.1 to 18)
(vi) Indian Contract Act, 1872— Section 13, foreign decree—To be recognized in an Indian Court, must be in conformity with fundamental policy of Indian Law—Breach of contract alleged—Suit filed 3 years after alleged breach—Suit filed within 4 years under applicable American Law of limitation—Maintainable—Time limit of 3 years prescribed under Indian Limitation Act—Decree of North Carolina Court opposed to Indian Limitation Act—Must be construed as fundamental policy of Indian Law—Decree passed by North Carolina Court inconclusive and covered by Section 13(e) of CPC.
(vii) Indian Contract Act, 1872— Sections 433(e) and 434(1)(a) —Winding up of Company—Petition for—Petitioner after obtaining decree from North Carolina court, neither resorted to execution proceeding in USA nor in India—Filed winding up a petition in India against judgment debtor—Attempt for enforcing a bona fide disputed debt—Winding up petition not maintainable—Dismissed. (Para 31)
Result: Petition dismissed.
Hrishikesh Roy, J.— This is an application under Section 433(e) and Section 434(1)(a) of the Companies Act, 1956 (‘the Act’), whereby winding up of the respondent company the Kitply Industries Ltd. (‘Kitply’) is sought by the petitioner California Pacific Trading Corporation (‘California’) on the alleged failure of Kitply to pay its debt. The debt is claimed to be due under a decree dated 12.4.2001 passed by a foreign court, i.e., the District court for the Middle District of North Carolina in the United States of America. By the said decree, the claim of California, against Kitply as the defendant has been decreed for a sum of $22,57,147.58 and interest thereon. It may be recorded herein that the judgment debtor Kitply has not filed any appeal against the decree and the decree holder California too has not taken any steps for execution of the decree, but have chosen to file this winding up petition against Kitply in a court in India.
Litigation history
2.1 The admission of the winding up petition was resisted by the respondent who contended that the petition is not maintainable and the remedy of the petitioner lies in execution’ of the decree. The respondent also contended that assumption of jurisdiction by the court of Middle District North Carolina was erroneous and the decree of the U.S. court is hit by Section 13 of the CPC as the plaintiff seeks to enforce the decree in Indian Court. But on a prima facie examination of the objection, the Company Judge on 18.11.2003 ordered advertisement of the winding up petition. Then Kitply challenged the order by filing Company Appeal No.4/2004. The Division Bench in its order dated 22.8.2006 held that the amount due under the decree of the District court of the USA is a debt for the purpose of Section 433(e) of the Act. The court also held that the decree holder could either execute the decree or seek winding up of the judgment debtor company. Accordingly the proceeding initiated under the Companies Act was held to be maintainable and the matter was remitted back to the Company Judge, for final adjudication of the winding up petition on merit.
2.2 Thereafter the matter was finally heard and the Company Judge on 19.11.2008 held that court cannot go behind decree of the U.S. court and examine the legality of the foreign decree. Other objections on enforceability of the decree in India raised by the respondent Kitply, was rejected and accordingly the winding up petition was allowed through order dated 19.11.2008. But considering the stand taken that the respondent company is a going concern, the court granted 3 months time to Kitply to pay off its debt due to the petitioner, California and in defaulting to pay within the said period, the respondent company was ordered to be wound up.
2.3 Being aggrieved with the winding up order, the respondent Kitply filed Company Appeal No. 1/2009. The learned Division Bench considered the appellant’s contentions and noted, inter alia, in its preliminary order that proceeding under Section 439 is not a proceeding for execution of a decree and rejected Kitply’s objection that a petition under Section 439 of the Company’s Act is not maintainable. The Appellate court opined that California is seeking recognition of a decree passed by a foreign court and not its execution and since winding up is not an execution proceeding, even in the absence of an appropriate notification by the Central Government under Section 44A of CPC, the company proceeding is maintainable and accordingly the appeal was posted for hearing.
2.4 Kitply being aggrieved with the preliminary order in the Company Appeal No. 1/2009 filed an S.L.P. against the order dated 29.7.2009. The Supreme Court while disposing of the S.L.P. on 23.10.2009 ordered the High Court to decide all the points urged by the parties. Future protection was also granted to Kitply by the Apex Court by giving 8 weeks breathing time to the company, if they feel aggrieved by the High Court’s decision. Mo
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