NCLAT : In Peter Johnson John vs. M/s KEC International Ltd.

Where foreign decree obtained ex-parte falls within the purview of a pre-existing dispute places an embargo on the powers of Adjudicating Authority to initiate Corporate Insolvency Resolution Process at the instance of a Corporate Debtor.

One can wonders as to how an Operational Creditor can seek initiation of Corporate Insolvency Resolution Process without the debt having crystallized and being payable in law or in fact.

It is not disputed that such ex-parte decree of a foreign court would not be executable in India until adjudicated upon by a Civil Court in India within the ambit of Section 13 of CPC and having regard for the same, the Appellant has chosen to file suit before Hon’ble High Court of Bombay, which is still sub-judice.

Unless the decretal amount is adjudicated upon by the Hon’ble High Court of Bombay as a legally payable claim, the same would not constitute a “Debt” in the hands of Appellant – Operational Creditor and unless the debt is crystallized and payable in law, the issue of default would not be attracted.

Admittedly, the Appellant is pursuing the litigation before the Bombay High Court in regard to the foreign decree and claim payable thereunder. He cannot be permitted to circumvent the appropriate legal remedy, already pursued, by invoking provisions of Section 9 of I&B Code, thereby defeating the fundamental provisions of law governing execution of a foreign decree obtained in ex-parte from a court located in a non-reciprocating territory. Such course is neither legally permissible nor warranted as admittedly the matter is not covered under Section 44A of CPC.

Thereby the Appellate Tribunal opined that the adjudication initiated by the Appellant before Bombay High Court wherein adjudication is sought in regard to foreign decree obtained ex-parte falls within the purview of a pre-existing dispute placing an embargo on the powers of Adjudicating Authority to initiate Corporate Insolvency Resolution Process at the instance of a Corporate Debtor. This is apart from the fact that until such adjudication fructifying in a decree favouring the Appellant, the claim of Appellant cannot be held to have crystallized into a “Debt payable in law”.

(Link : https://nclat.nic.in/Useradmin/upload/6556060535d1c7e90b45e6.pdf)