Foreign Decree Awarding Damages For Breach Of Contract Cannot Be Capped By FEMA Or RBI Directions: Delhi High Court
Section 44A CPC - Regulatory ceilings under ECB guidelines cannot override judicially awarded damages; UK commercial court decree held executable
Justice Amit Bansal, Delhi High Court
The Delhi High Court has held that damages awarded by a competent foreign court for breach of contract cannot be subjected to ceilings prescribed under the Foreign Exchange Management Act, 1999 (FEMA) or directions issued by the Reserve Bank of India (RBI). The Court clarified that regulatory caps under RBI’s External Commercial Borrowing (ECB) framework cannot override judicially determined compensation.
The Bench further noted that even if certain relief granted by a foreign court may not be permissible under Indian regulatory law, that by itself would not render the decree unenforceable under Section 44A CPC. Relying on precedents including Alcon Electronics Private Limited v. Celem S.A. of FOS 34320 Roujan, Frane and Another (2012) 2 SCC 253 and NTT Docomo Inc. v. Tata Sons Limited 2023 SCC OnLine Guj 3152, the Court emphasised that enforcement of foreign judgments should not be obstructed on regulatory grounds once substantive rights have been crystallized by a competent foreign court.
Justice Amit Bansal observed, “In my considered view, the amounts awarded by a competent Court, whether Indian or foreign, towards damages for breach of contract, cannot be subject to ceilings prescribed under FEMA and/or RBI directions/circulars. Even if amounts have been awarded under certain heads by a Foreign Court of competent jurisdiction, which are not permissible in Indian law, the decree passed by the Foreign Court would not become unenforceable. This would be particularly true in cases where the contract between the parties is governed by foreign law and the foreign court has adjudicated the case on the basis of the said foreign law”.
Advocate Ankur Kashyap appeared for the petitioner-decree holder and Senior Advocate Sandeep Sethi appeared for the respondent-judgment debtor.
The present execution petition was filed by the decree holder-petitioner under Section 44A CPC seeking enforcement of a decree passed by the High Court of Justice, Business & Property Courts of England & Wales, Commercial Court, in favour of a foreign bondholder against an Indian company.
In the pertinent matter, the dispute was regarding Foreign Currency Convertible Bonds (FCCBs) issued by Prakash Industries Limited and subscribed to by Peter Beck und Partner Vermögensverwaltung GmbH. Following defaults in payment of coupon interest and delay in conversion of bonds, proceedings were initiated before the English Commercial Court.
The English Commercial Court awarded the decree-holder an Early Redemption Amount exceeding USD 11 million, interest at 7.95% per annum, damages for delayed conversion of FCCBs, interest on damages, and costs.
Thereafter, no appeal was filed in the UK, and the decree attained finality, subsequent to which, the decree-holder then approached the Delhi High Court under Section 44A CPC seeking execution in India.
The judgment-debtor objected, contending that the award violated FEMA and the ECB Master Direction issued by the Reserve Bank of India. It argued that the interest exceeded the “all-in-cost ceiling” and that damages breached the 2% cap prescribed for penal charges under paragraph 2.1(vii), thereby attracting the exceptions under Section 13 CPC.
The High Court rejecting the objections, held that paragraph 2.1(vii) applies only to prepayment charges and penal interest, not to damages awarded by a competent court for breach of contract.
The Court also noted contradictions in the RBI’s stand, while acknowledging that damages are current account transactions not requiring prior approval, the RBI simultaneously sought to subject them to ECB ceilings. Accordingly, the Bench declined to accept this position, holding that regulatory restrictions cannot dilute court-awarded damages.
Therefore, observing that the decree did not fall within the exceptions under Section 13 CPC, the Court dismissed the objections with costs of ₹1,00,000 and directed remittance of the decretal amount to the decree-holder.
Cause Title: Peter Beck Und Partner Vermogensverwaltung Gmbh v. Prakash Industries Limited [Neutral Citation: 2026:DHC:1547]
Appearances:
Petitioner/Decree Holder: Ankur Kashyap, Ajith S. Ranganathan, Rohit Rajershi, Aman Bajaj, Purushartha Singh & Siddharth Dua, Advocates.
Respondent/Judgment Debtor: Sandeep Sethi, Senior Advocate, Ankur Chawla, Akshay Ringe, C. B. Bansal, Gurpreet Singh, Kunal Aggarwal, Ishanee Kapoor, Janhavi Negi, Shivam Bansal, Ravi Sharma, Abhinav Sharma, Ankur Sharma and Snehashish B., Advocates.