Co.Pet. 10/2002 BEFORE THE HON’BLE MR. JUSTICE HRISHIKESH ROY This is an application under Section 433(e) and Section 434(1)(a) of the Compani es Act, 1956 (hereinafter referred to as the Act ), whereby winding up of the r espondent company the Kitply Industries Ltd. (hereinafter referred to Kitply ) is sought by the petitioner California Pacific Trading Corporation (hereinafter referred as 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 cou rt i.e. the District Court for the Middle District of North Carolina in the Unit ed States of America. By the said decree, the claim of California, against Kitp ly as the defendant has been decreed for a sum of $22,57,147.58 and interest th ereon. It may be recorded herein that the judgment debtor Kitply has not filed a ny 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 p etition against Kitply in a court in India. LITIGATION HISTORY 2.1 The admission of the winding up petition was resisted by the res pondent who contended that the petition is not maintainable and the remedy of th e petitioner lies in execution of the decree. The respondent also contended that assumption of jurisdiction by the Court of Middle District North Carolina was e rroneous and the decree of the U.S. Court is hit by Section 13 of the C.P.C. 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 advertisem ent of the winding up petition. Then Kitply challenged the order by filing Comp any Appeal 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 holde r could either execute the decree or seek winding up of the judgment debtor comp any. 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 a djudication 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 can’t go behind decree of the U.S. Court and examine the legality of the foreign decree. Other objections on enforceability of the d ecree 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 grant ed 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 ord ered 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 appe llant’s contentions and noted, inter alia, in its preliminary order that proceed ing 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 no t maintainable. The Appellate Court opined that California is seeking recognitio n 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 notific ation by the Central Government under Section 44 A of CPC, the company proceedin g is maintainable and accordingly the appeal was posted for hearing. 2.4 Kitply being aggrieved with the preliminary order in the Compan y Appeal No. 1/2009 filed an S.L.P. against the order dated 29.7.2009. The Supr eme 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 t o Kitply by the Apex Court by giving 8 weeks breathing time to the Company, if they feel aggrieved by the High Court’s decision. More importantly, the maintain ability issue of the winding up petition was expressly kept open by the Supreme Court while disposing of the S.L.P. of Kitply on 23.10.2009. 2.5 The Company Appeal No. 1/2009 was finally ordered on 23.12.2009 wherein the Division Bench held that it is open to the judgment debtor to resist the enforcement of a foreign Court’s decree for any of the 6 exceptions in Sect ion 113 of the CPC and the matter was remitted back to this Court for a fresh ad judication on all the issues raised by the judgment debtor. CONTENTION OF PETITIONER 3.1 The petitioner contends that the respondent company supplied def ective marine teak plywood to the petitioner which were rejected by its customer s i.e. McEwen Lumber Company ( McEwen ) and Weber Plywood and Lumber Company ( W eber ) and since the defective goods were not replaced, the petitioner suffered loss of current and future business. Accordingly a civil lawsuit was initiated f or recovery of loss and damage in the United States District Court for the Middl e District of North Carolina and the said suit was decreed on 12.4.2000 for U.S. $22,57,147.58 with interest and no appeal being filed against the said decree, it became final. Accordingly the decreed amount became payable by the respondent to the petitioner and since a demand made upon the respondent to pay the equiva lent Indian sum of Rs.11,66,00,227/- (Rupees eleven crores sixty six lakhs two t wenty seven) was not satisfied, the said sum became a debt within the meaning of Companies Act, 1956, payable to the petitioner by the respondent. Accordingly it is the submission of Mr. Dutta that since the respondent failed to pay the debt despite receipt of a statutory notice, it is liable to be wound up by this Court under Section 433(a) of the Act. 3.2 Mr. N. Dutta, learned Senior Counsel argues that the plaintiff h ad adduced evidence in the North Carolina Court and the Court considered the cas e set up by the plaintiff on the basis of available materials and evidence broug ht on record by the plaintiff. As the damages have been quantified on the basis of projections contained in the pleadings and the conclusions are supported by r easoning given by the learned Trial Court and the defendant didn’t adduce any ev idence and permitted the decree to be passed ex parte without contest, the Couns el submits that the decree of the foreign Court was given on merit and is conclu sive and can be acted upon for the present proceeding in India. 3.3 The Senior Counsel contends that the District Court of North Car olina was aware of the basis on which the claim for damage was set up by the pla intiff. Since it was also clearly projected in the plaint that the defendant wo uld manufacture marine teak ply wood, in accordance with the standards propagate d by the International Hardwood Products Association ( IHPA ) and there was a re presentation by the defendant that it would manufacture the goods according to t he IHPA standards. It was further reflected in the plaint that purchase orders w ere placed with the defendant to fulfill the requirement of the plaintiff’s cust omers McEwen and Weber. Therefore Mr. Dutta submits that the decree passed by th e U.S. Court is on reasonable basis on full understanding of all the material pa rticulars and the same is conclusive amongst the litigating parties. 3.4 Referring to the prayer made in the plaint, Mr. Dutta submits th at a claim for recovery of quantified loss and unspecified damage were made by t he plaintiff and the damage payable was subsequently quantified by the Court on appropriate material and evidence on account of loss of future profit as well as the damages suffered for breach of contract and false representation on warrant y of the goods as well as cost and action of the litigation. He submits that in a business contract, margin of profit is always a subject of assumption and the extent of future profit on the basis of an on going business relationship, is a matter to be determined through evidence and since the Court took into account t he evidence adduced by the plaintiff, the damage awarded was reasonable and on p roper assumption. The Counsel submits further that even under Section 73 of the Indian Contract Act, 1872 compensation claim for loss or damage caused by breac h of contract is maintainable and the U.S. Court has appropriately quantified th e loss and damage from natural and proximate consequence of the breach made by t he respondent and therefore the decree of the U.S. Court should be recognized fo r this winding up proceeding. 3.5 The petitioner contends that unliquidated damage once assessed a nd upon adjudication by a competent adjudicatory authority do give rise to a deb t against a judgment debtor and since the respondent failed to repay the dues up on demand, it must be deemed unable to pay its debt and a proceeding for winding up against such defaulting company is maintainable. 3.6 Defending the jurisdictional competence of the North Carolina Co urt to pass a decree against an India based company, Mr. Dutta submits that a su it for damage can also be filed where the impact of the breach was felt i.e. U.S .A., by a contracting party. He cites 1991 (1) GLR 389 - State of Meghalaya vs. Jyotsna Das in support of his submissions. 3.7 The Senior Counsel submits that Title 28 of the U.S. Code is a p ositive law governing procedure and jurisdiction of U.S. District Courts. He ref ers to the Venue given in Chapter 87 of Title 28 to show that under Sub-Clause (d) of Clause 1391 an alien of U.S.A. may be sued in any district and therefo re the North Carolina District Court was competent to exercise jurisdiction. Mr. Dutta points out that under Clause 1332 of Chapter 85 of Title 28 of U.S. Code, a U.S. District Court is competent to adjudicate civil action where the claim e xceeds U.S. $75,000/- in a case between U.S. citizen and a subject of a foreign State and accordingly he contends that the decree was given by a competent Court in U.S.A. and it must receive due recognition in Indian Court. 3.8 Alternately Mr. Dutta contends that since the respondent submitt ed to the jurisdiction of the U.S. Court by filing pro se, it waived its right t o contest the jurisdiction of the said Court. He points out that in the response filed on 22.7.1999 in U.S. Court by the respondent, defences on merit of the cl aim was advanced and prayer was made before the North Carolina Court, inter alia , for dismissing the suit and pronouncement of judgment. In such circumstances, the Counsel submits that the U.S Court had rightly held that Court had personal jurisdiction over the defendant. CONTENTION OF RESPONDENT 4.1 Mr. S. Talukdar, the learned Senior Counsel at the very outset s ubmits that since this winding up petition is being considered on remand by the Division Bench, the earlier judgment rendered by the Company Judge on 19.11.2008 (whereby the winding up was allowed), should not inhibit this Court from taking a fresh view in the matter. In support of his contention, the learned Counsel r elies upon a decision of the Madhya Pradesh High Court reported in AIR 1959 MP 181 in the case of Kaluram vs Mehtab Bai to show that an order of remand imp lies reversal of the earlier decision and the whole case is open for retrial by the original court, except in matters expressly or impliedly decided by the orde r of remand. Referring to the recording in the remand order dated 23.12.2009 of the Division Bench, Mr. Talukdar points out that this Court is free to consider all the objections(s) raised under Section 13 CPC as this has also been conceded by the learned Counsel who appeared for the petitioner California. 4.2 The learned Senior Counsel questions the enforceability of the d ecree passed by the District Court of North Carolina, USA, by contending that th e judgment is not conclusive in as much as, it was not passed by a Court of comp etent jurisdiction. The Counsel points out that no part of the cause of action amongst the parties arose within the jurisdiction of the foreign court and there fore the decree passed by the foreign Court is not conclusive and is hit by Clau se (a) of Section 13 CPC. 4.3 The respondent refers to the plaint filed by California to proj ect that the plaintiff hasn’t indicated how the Court at USA has territorial jur isdiction over a contractual dispute, where the contract was concluded and execu ted in Indian territory. He submits that the U.S. Court might have jurisdiction over a foreign defendant on the basis of the Municipal Laws of that country. But when the decree is sought to be enforced in an Indian Court, the decree to be r ecognized, mustn’t be inconsistent with the statutory laws in India. The respond ent refers to the plaint filed by California to show that the defendant Kitply i s conceded to be an Indian Company with its principal place of business at Calcu tta and only at the principal place of business i.e., Calcutta, the purchase ord ers were placed, goods were approved for shipment, letters of credit and bills o f lading were issued, showing the plaintiff to be the consignee. The respondent contends that in the plaint, places at U.S.A were projected as the place, where pre-contract discussion with officers of the defendant Kitply had taken place b ut since Situs of the contract was Calcutta, the foreign decree can’t be enforce d in India as it is hit by Section 20(c) of C.P.C. since the proceeding in the U .S.A., is in contravention of the applicable Indian laws for Court’s jurisdictio n. 4.4 The enforceability of the foreign decree is also challenged on t he ground that the same has not been given on the merit of the case since the de creed amount goes way beyond the claim of the plaintiff. The respondent contends that the petitioner has not proved its claim nor has quantified the damage befo re the foreign court and Court’s conclusion is perverse as it was reached withou t any evidence on the damage suffered for alleged loss of potential business and the same can’t be utilized in support of a winding up proceeding in India. The learned Counsel submits that the alleged loss of future business suffered by the plaintiff was never proved in the Trial Court as the ultimate 3rd party purchas ers were never brought on record either as party or as witness in the District C ourt and therefore the foreign decree is hit by the exception Clause (b) of Sect ion 13 CPC and such inconclusive foreign judgment can’t be used to sustain an un paid debt claim against Kitply. In any event it is contended that, quantificati on of damage was based entirely on surmises of the Trial Judge and in the absenc e of any evidence, no debt can be said to be due from Kitply to the petitioner and the winding up petition is accordingly not maintainable. The learned senior counsel relies upon the Supreme Court decision in Union of India vs. Raman Iron Foundry reported in (1974) 2 SCC 231 to submit that a party complaining of breac h of contract can recover only reasonable compensation proximate to the damage s ustained and a claim for unliquidated damage does not give rise to a debt, until the liability is adjudicated and damage assessed on evidence, by an adjudicatin g authority. When there is a beach of contract, the party who commits the breach does not eo instant incur any pecuniary obligation nor does the party complain ing of the breach becomes entitled to a debt due from the other party. The only right which the aggrieved party secures is the right to sue for damage. By refer ring to this judgment, the learned counsel contends that the alleged damage suff ered by the plaintiff California has not been assessed through evidence by the N orth Carolina Court and the damage is quantified on the basis of conjecture only and therefore recognition of such a decree of damage is impermissible and on th at basis a debt can’t be enforced against the respondent in an Indian Court. 4.5 The Senior Counsel submits that since the suit was filed beyond 3 years of cause of action for claim arising out of alleged supply of defective goods, the Law of Limitation prevalent in India is disregarded and the foreign d ecree is hit by Clause (f) of Section 13 CPC. 4.6 Referring to the certificate(s) of inspection given by the Presi dent of California at Calcutta, approving the goods for shipment to the consign ee, the learned Counsel contends that these certificates were deliberately withh eld by the plaintiff from the trial Court and therefore the decree secured by Ca lifornia by alleging supply of sub-standard goods was obtained by concealment w hich amounts to fraud under the Indian Contract Act and on this score alone, th e foreign Court’s decree is inconclusive and can’t be enforced in India. The lea rned counsel points out that the goods were examined by the consignee before its transshipment and requisite Inspection Certificates were given to the consignor to dispatch the goods. But the Certificates of Inspection was not produced by t he plaintiff in the trial Court although the certification certainly had materia l bearing on the claim for damages. By suppression of these material document(s) the Trial Court according to the Counsel, was tricked into awarding a claim for damages against the defendant Kitply. The learned counsel relies upon the decis ion of the Apex Court in Sankaran Govindan vs. Lakshmi Bharathi reported in AIR 1974 SC 1764, where the Court accepted that if a foreign judgment was obtained b y fraud, it will be covered by the exceptions in Section 13 of the CPC and such judgment can’t be held to be conclusive for use in Indian Courts. 4.7 Mr. Talukdar points out that plaintiff being a domicile of North Carolina may be good enough under the Municipal Laws of U.S.A., to confer juris diction on the U.S. Court to award damages against a foreign based defendant. Bu t since recognition of the foreign decree is sought for a Court proceeding in In dia, the residence of the defendant or the place where the cause of action arose becomes relevant and since the defendant does not reside or carries on business within the territorial limits of the US Court, a decree for damages awarded by a US Court by placing reliance on the municipal laws of that country, can’t be e nforced automatically in India. The learned counsel submits that Section 13 of t he CPC sets out the limits on application of decree passed by a foreign Court an d no proceeding to recover a debt on the basis of a foreign decree can be initia ted, without fulfilling the conditions laid down in Clauses (a) to (f) of Sectio n 13 of the CPC. In support of this contention, he relies upon the decision of t he Supreme Court in Roshanlal Kuthalia vs. R.B. Mohan Singh Oberio reported in ( 1975) 4 SCC 628 and Smt. Satya vs. Teja Singh reported in AIR 1975 SC 105. 4.8 The decision of the Apex Court in Raj Rajendra Sandar Moloji Nar Singh Rao Shitole vs. Shankar Saran reported in AIR 1962 SC 1737 is also relied on by the learned counsel to show that the provisions of Section 13 of the CPC are not merely Rules of procedure but are Rules of substantive law and the decre e of the U.S. court must be valid in the international sense and can’t be enforc ed ipso facto in Indian Courts only because, the proceeding in the North Carolin a Court conforms to the municipal laws applicable in USA. 4.9 Assailing the finding recorded by the District Court at USA that the defendant waived their right to contest the Court’s jurisdiction as it file d its response to that Court, the learned counsel points out that the defendant immediately on receipt of summons from the U.S. Court, at the very first opportu nity in February, 1999 had objected to the territorial competence of the Distric t Court at USA and the said response of the defendant was erroneously construed as submission of the defendant to the jurisdiction of the U.S. Court. The learne d counsel relies upon the decision in the case of Narhari Shivram Shet Narvekar vs. Pannalal Umediram reported in AIR 1977 SC 164 to contend that an incompetent Court cannot exercise jurisdiction over a foreign subject merely because, the f oreign subject responded to the summons of the Court particularly when, response was to the effect that the U.S. Court lacked territorial jurisdiction, to exami ne the claim of damages against the foreign defendant. 4.10 Mr. Talukdar refers to the provisions of Section 73 of the India n Contract Act, 1972 to contend that compensation can’t be awarded under Indian Law for remote and indirect loss or damage. He cites the decision of the Apex Co urt in Karsandas H. Thacker vs. M/s The Saran Engineering Co. Ltd. reported in A IR 1965 SCC 1981 to project that on a breach of contract claim, the affected party is entitled to receive compensation only for such loss suffered in the us ual course of business and remote and indirect loss sustained by the breach, wi ll not entitle the party to any compensation. Furthermore, the offending party c an’t be made to pay compensation for the loss suffered because of commitment mad e to a third party, unless it is so stipulated in the contract transactions. The learned Counsel submits that no evidence has been recorded by the District Cour t to show the quantum of damage suffered by the plaintiff, because of loss of bu siness with McEwen and Weber and in the absence of any evidence, payment of dama ge could not have been ordered against the defendant on this count. 4.11 Pointing out the summary nature of a winding up proceeding, the learned Counsel finally submits that a company Court is not expected to hold tr ial when dispute as to the liability for payment of debt is bona fide, substanti al and where the claim requires detail investigation of facts and evidence and c onsidering the objection raised by Kitply against recognition of the foreign dec ree and the necessity for a detailed examination of the facts and evidence to co nsider the objections raised under Clauses (a) to (f) of Section 13 of CPC, the winding up proceeding is not maintainable. Relying on the decision of the Apex C ourt in IBA Health (India) Private Limited vs. Info-Drive Systems SDN. BHD repor ted in (2010)10 SCC 553, Mr. Talukdar submits that Kitply has raised a bona fide dispute based on substantial grounds and the debt is hotly contested and ac cordingly he contends that the Company Court is not expected to hold a full tria l into the matter and considering the substantial nature of objection(s), the wi nding up petition should be dismissed. DISCUSSION ON ARGUMENTS 5. The arguments advanced by the rival Counsels requires me to adju dicate as