New Delhi: The Supreme Court of India has held that a foreign judgment rendered in summary proceedings, where leave to defend is refused despite the existence of bona fide triable issues, is unenforceable in India, as it does not constitute a judgment “on the merits” under Section 13(b) of the Code of Civil Procedure, 1908 (CPC).
The Court further held that prior permission of the Reserve Bank of India (RBI) under Section 47(3) of the Foreign Exchange Regulation Act, 1973 (FERA), is a condition precedent to the initiation of any steps for enforcement of a foreign decree in India, while clarifying that there is no bar to the institution of legal proceedings to determine liability.
The judgment was pronounced by a bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe on April 21, 2026, dismissing an appeal against the Delhi High Court Division Bench’s refusal to enforce a judgment of the High Court of Justice, Queen’s Bench Division, England.
The dispute arose from a Share Purchase and Co-operation Agreement dated May 12, 1995, between the appellant, Messer Griesheim GmbH (now Air Liquide Deutschland GmbH), and the respondent, Goyal MG Gases Private Limited, for a joint venture in industrial gases. The respondent subsequently availed External Commercial Borrowing of USD 7 million from Citibank N.A., London, with the appellant furnishing an irrevocable guarantee.
While granting permission for the guarantee on September 3, 1997, the RBI imposed two conditions: (i) there would be no outflow of foreign exchange by way of any fee for the guarantee; and (ii) in case of invocation of the guarantee, no liability whatsoever would extend to the Indian company.
On October 8, 2001, the lender bank invoked the guarantee against the appellant due to the respondent’s default, and the appellant discharged an outstanding liability of USD 4.78 million. It thereafter sought reimbursement from the respondent under the subrogation clause. The respondent denied liability, contending that the payment was made in settlement of its own claims against the appellant for breach of the SPCA.
The appellant instituted proceedings before the English Court, which initially passed a default judgment in 2003. Subsequently, on the appellant’s own application, the judgment was set aside, and a summary judgment dated February 7, 2006, was passed against the respondent after rejecting its application for leave to defend.
The appellant then sought execution before the Delhi High Court under Section 44A of the CPC. The learned Single Judge held the judgment to be enforceable; however, the Division Bench reversed this finding, holding that the judgment was contrary to the provisions of law in force in India and had been rendered without consideration of material evidence.
Before the Supreme Court, the appellant, represented by Dr. A.M. Singhvi, Senior Advocate, contended that the summary judgment was rendered on merits after hearing the parties and examining witness statements, and that the respondent was estopped from challenging a judgment that had attained finality. The respondent, represented by Mr. P. Chidambaram, Senior Advocate, submitted that the English Court had ignored binding RBI conditions under Indian foreign exchange law, that the balance sheets reflected no subsisting liability, and that the summary proceedings denied a meaningful opportunity to defend.
On the first issue, the Supreme Court held that the respondent’s defences—including three oral agreements asserting non-recourse understandings—were supported by contemporaneous documentary material, such as balance sheets and minutes of board meetings, carrying statutory significance under the Companies Act, 1956, and adopted in meetings where the appellant’s nominee director had participated.
The existence of such material led the Court to conclude that triable issues had indeed been raised, entitling the respondent to a full opportunity to establish its case through oral evidence and cross-examination. Relying on Alcon Electronics (P) Ltd. v. Celem S.A. of France, (2017) 2 SCC 253; Sankaran Govindan v. Lakshmi Bharathi, (1975) 3 SCC 351; and International Woollen Mills v. Standard Wool (U.K.) Ltd., (2001) 5 SCC 265, the Court held that a decree rendered by refusing leave to defend in the presence of bona fide triable issues cannot be regarded as a judgment on the merits within the meaning of Section 13(b) CPC.
The foreign judgment was further held to fall foul of Section 13(c) (failure to give effect to Indian foreign exchange law), Section 13(d) (proceedings opposed to natural justice), and Section 13(f) (enforcement contrary to law in force in India).
On the second issue, the Court clarified the scope of Section 47(3) of FERA, holding that while the provision permits the institution of legal proceedings to determine liability, it simultaneously imposes a mandatory prohibition—through the expression “no steps shall be taken”—on enforcement of any judgment without prior permission of the Central Government or the RBI.
Relying on Algemene Bank Nederland NV v. Satish Dayalal Choksi, 1989 SCC OnLine Bom 282, the Court held that regulatory permission must be obtained before initiating any step in execution, including an application under Order XXI of the CPC.
However, the Court rejected the respondent’s contention that the RBI’s conditional approval dated September 3, 1997, imposed an absolute bar on enforcement. It clarified that a foreign judgment satisfying the requirements of Section 13 CPC may be enforced in India upon obtaining RBI permission.
The Court observed that the preferable course is to first obtain RBI permission and thereafter approach the Court for execution—a sequence that avoids the redundancy of a court affirming enforceability only for the RBI to subsequently refuse permission. To the extent that the High Court had taken a contrary view on the FERA issue, that position was set aside.
The appeal was dismissed, with no order as to costs.
Case Title: Messer Griesheim GmbH (Now Called Air Liquide Deutschland GmbH) v. Goyal MG Gases Private Limited (2026 INSC 4010)
