Foreign Decree Enforcement Subject to RBI Permissions: Supreme Court

On 21 April 2026, the Supreme Court, in Messer Griesheim GmbH (now Air Liquide Deutschland GmbH) v. Goyal MG Gases Pvt. Ltd., 2026 INSC 401 (Civil Appeal arising out of SLP (C) No. 4774 of 2023), examined the enforceability of a foreign judgment under Section 13 (When foreign judgment not conclusive) and Section 44A (Execution of decrees passed by Courts in reciprocating territory) of the Code of Civil Procedure, 1908 (CPC), along with the regulatory framework under the (now repealed) Foreign Exchange Regulation Act, 1973 (FERA), as preserved by the savings clause in Section 49 of the Foreign Exchange Management Act, 1999 (FEMA).

The Court held that a foreign judgment rendered in summary proceedings, without giving a proper opportunity to defend, would fall within the exception under Section 13(b) CPC (when the judgement is not as per merits of the case) and be unenforceable in India.

The Court further clarified that under Section 47 FERA (which restricts enforcement actions involving foreign exchange without prior permission), while there is no bar on initiating legal proceedings, enforcement of a decree involving foreign exchange outflow is subject to prior permission of the Reserve Bank of India or the Central Government, and regulatory conditions imposed thereunder operate at the stage of enforcement without extinguishing underlying contractual rights. This interpretation balances the values of access to justice and the regulatory control.

The dispute arose from a Share Purchase and Co-operation Agreement dated 12 May 1995 between the appellant, Messer Griesheim GmbH, a foreign company and the respondent, Goyal MG Gases Pvt.Ltd., for establishing a joint venture in India. Subsequently, the respondent decided to raise funds through overseas borrowing, and the appellant’s nominee directors assured arrangement of such funds.

In 1997 the Government of India granted permission clarifying that “no additional foreign exchange liability, either express or implied, is being assumed under the arrangements” for External Commercial Borrowing (ECB) facility from Citibank UK (lender Bank) and the due payment was irrevocably guaranteed by the appellant. Furnishing of a guarantee by the appellant was approved by the RBI on two conditions (i) no foreign exchange fee would be paid for the guarantee, and (ii) upon invocation of the guarantee, no liability would extend to the Indian company.

In October 2001, the lender-bank invoked the guarantee due to default by the respondent, and the appellant discharged the liability of approximately USD 4.78 million on 09.10.2001, demanding reimbursement under the subrogation clause. When the respondent failed to reimburse, the appellant in January 2003 initiated proceedings before the High Court of Justice, Queen’s Bench Division (English Court) and obtained a default judgment on 06.02.2003. Faced with objections to enforceability of an ex parte decree in India, the appellant itself applied to set aside the default judgment and sought a summary judgment on merits, which was passed on 07.02.2006 directing payment of USD 5,824,564.74 and Euro 31,364.74 with interest and costs. The appellant then filed an execution petition before the Delhi High Court under Section 44A CPC.

In November 2013, the Single Judge of the Delhi High Court rejected the respondent’s objection under Section 13 CPC, holding that the English Court’s judgement was on merits and was enforceable in India. However, the Division Bench set aside this finding, holding that the foreign judgment was not enforceable as it failed to consider material evidence and that the Delhi High Court lacked jurisdiction under Section 44A CPC. Aggrieved, the appellant approached the Supreme Court.

The Supreme Court examined whether the foreign judgment satisfied the requirements of Section 13 CPC, particularly whether it was on merits. It emphasised that for a foreign decree to be enforceable in India, it must reflect a substantive adjudication of the rights of the parties after giving a fair and reasonable opportunity to both the parties.

The Court noted that before the English Court, the respondent had raised multiple defences, including alleged prior agreements and relied on documents such as balance sheets and board resolutions, which carry significance under Sections 194, 210, 211 and 215 of the Companies Act, 1956. The balance sheets represented true and fair view of the company’s financial position, which indicated that there was no liability due from the respondent to the appellant.

The Court emphasised that for a foreign judgment to be enforceable, it must be rendered after a fair opportunity to contest and upon consideration of substantive issues. It held that the summary procedure adopted by the English Court resulted in denial of a meaningful opportunity to the respondent to present its case, particularly where disputed questions of fact required detailed examination through evidence and cross-examination. Accordingly, the Court concluded that the foreign judgment was not “on merits” and fell within the exception under Section 13(b) CPC.

The Court further emphasised that the grant of summary judgment, particularly in light of the principles governing leave to defend under Order XXXVII CPC (the summary procedure available for suits on bills of exchange, hundis, promissory notes and other liquidated demands) as restated in IDBI Trusteeship Services Ltd. v. Hubtown Ltd., (2017) 1 SCC 568, and the standards for summary disposal under CPR 24.2 of the UK Civil Procedure Rules (which permits a court to decide a claim without trial only where the defence has “no real prospect” of success), must be exercised with caution where a ‘realistic’ defence exists. In the present case, the refusal to grant leave to defend, despite bona fide disputes supported by documentary material, led to denial of procedural fairness and vitiated the conclusiveness of the foreign judgment.

The second issue concerned the effect of the conditions imposed by the RBI under FERA. The Court clarified that Section 47 FERA draws a distinction between ‘legal proceedings being brought in India’ and the bar that ‘no steps shall be taken for the purpose of enforcing’ a judgment or order. While there is no prohibition on initiating legal proceedings, before any step is taken for enforcement of the decree, permission of the Central Government or RBI is necessary.

The Court further explained that FERA, being a statute enacted in national economic interest to regulate and conserve foreign exchange, mandates compliance with RBI permissions and conditions, which operate at the stage of enforcement rather than adjudication. In this context, the Court held that RBI approval is not required to initiate proceedings, but is necessary before taking steps for enforcement, thereby balancing access to justice with regulatory control over foreign exchange.

Accordingly, the Supreme Court upheld the refusal to enforce the foreign judgment and dismissed the appeal. While the Court held that no infirmity arose under Section 13(a) (jurisdiction) or Section 13(e) (fraud) — the parties having submitted to English law and the jurisdiction of the English Courts under clauses 12.5, 31.1 and 31.2 of the Loan Agreement — it concluded that the judgment failed the tests under Section 13(b) (not on merits), Section 13(c) (failure to recognise applicable Indian law, including the RBI conditions), Section 13(d) (proceedings opposed to natural justice in denying leave to defend) and Section 13(f) (sustaining a claim founded on breach of Indian law). The Court further held that regulatory permissions under FERA, read with Sections 8 (restrictions on dealings in foreign exchange) and 47, operate at the stage of enforcement and reflect the State’s control over foreign exchange, without barring adjudication of rights by courts.