Citation Codes : 2023 SCC OnLine Del 7207 ; 2023 : DHC : 8134
Date of Judgement : 09 November 2023
Court : High Court of Delhi
Judges : Justice Prateek Jalan
Facts of the case
The case involved the pursuit of enforcement proceedings for a foreign arbitral award dated 24 January 2018 under a Securities Purchase Agreement (SPA) executed on 19 September 2012. The arbitration took place under the aegis of the Singapore International Arbitration Centre, with the seat of arbitration being Singapore. The award holders filed the enforcement proceedings in the Delhi High Court. The award debtor contested the jurisdiction of the court in entertaining the enforcement proceedings.
Issues involved in the case
Whether a written-off debt owed to the award debtor by an entity located within the jurisdiction of the executing court constitutes an ‘asset’ for establishing jurisdiction to enforce a foreign arbitral award?
Award Debtor’s Position
The award debtor vehemently contested the Court’s jurisdiction, asserting the absence of residency or assets within the jurisdictional boundaries. They argued that the original enforcement petition primarily relied on the execution of the Securities Purchase Agreement (SPA) in New Delhi to establish the Court’s jurisdiction and subsequent claim regarding assets within the jurisdiction, specifically a debt owed by Himalayan Green Energy Private Limited (HGEPL) with registered address in New Delhi, was introduced belatedly and lacks merit.
They added that the award debtor had previously written off the debt owed by HGEPL due to its defunct status and is not even pursuing the debt against HGEPL . This precludes the debt from constituting an asset within the jurisdiction of the Court for enforcement purposes.
Award Holder’s Position
The award holder contended that the debt owed by Himalayan Green Energy Private Limited (HGEPL) to the award debtor constitutes an asset within the Court’s jurisdiction, regardless of the award debtor’s accounting treatment of the debt. They stressed on the fact that the debt has not been written off rather only treated as “doubtful”. Additionally, HGEPL is continuing as a going concern and still shows the debt owed to award debtor in its balance sheet.
Judgement and Reasoning
The Court, after considering the arguments presented by both parties, dismissed the award debtor’s preliminary objection regarding jurisdiction and affirmed its jurisdiction over the enforcement proceedings. The court reasoned as follows:
Mere presence of Assets within Jurisdiction is sufficient: The court elaborated that presence of any type of assets within the jurisdictional boundary of the court is sufficient to justify its involvement in enforcement proceedings.
Reliance on Motorola INC vs Modi Wellvest was placed wherein Delhi High Court had observed that availability of asset within the jurisdiction is sufficient for entertaining execution petition. Factors such as insufficiency of asset for satisfaction of the decree is irrelevant.
Written-off debt remains admissible irrespective of accounting treatment: The court by relying on Salim Akbarli Nanji v Union of India held that the written-off debt does not render the asset as unrecoverable. The court also rejected the argument of award debtor that there is no possibility of recovery of debt due to HGEPL. The court observed that in the enforcement proceedings, the nature of the asset of the award debtor is irrelevant.
No merit in Forum Shopping argument: The court rejected the argument of award debtor that accepting the jurisdiction would lead to forum shopping. The court observed that the argument of forum shopping does not apply to enforcement proceeding as it applies to substantive civil proceedings. The court reasoned that an award holder is entitled to proceed against award debtor in any jurisdiction where the assets are located.
Ultimately, the Court determined that the debt owed by HGEPL to the award debtor indeed constitutes an asset within its jurisdiction, thereby satisfying its jurisdiction in the enforcement proceedings.
Author(s)
Tavleen Kaur
Student at VIPS (GGSIPU)