FEMA Cannot Be Invoked to Thwart a Foreign Decree: Delhi High Court Enforces English Commercial Court Judgment Against Prakash Industries

“A Foreign Court Cannot Be Expected to Apply an Indian Statute Suo Motu” –  On 23 February 2026, the Delhi High Court reinforcing the enforceability of foreign decrees under Section 44A of the Code of Civil Procedure, 1908. Justice Amit Bansal held that objections based on alleged violations of the Foreign Exchange Management Act, 1999 and RBI’s Master Direction–ECB cannot render a foreign judgment inconclusive under Section 13(c) or 13(f) CPC, particularly when such objections were never raised before the foreign court.

The Court allowed execution of the English Commercial Court decree, rejected all objections of Prakash Industries, and imposed costs of ₹1,00,000, observing that the objections were filed “solely to cause obstruction and to cause delay in the execution of the Foreign Decree.”

The ruling assumes importance in the evolving jurisprudence on cross-border enforcement, FEMA compliance, and the doctrine of comity of courts.

FCCBs, Default and the English Commercial Court Decree

Prakash Industries Limited, an Indian integrated steel and power company, had issued Foreign Currency Convertible Bonds (FCCBs) subscribed by Peter Beck und Partner Vermögensverwaltung GmbH, a German entity. The parties executed a Subscription Agreement dated 20 December 2017, governed by English law. The FCCBs had received RBI approval on 8 November 2017.

Disputes arose when Prakash Industries defaulted in payment of coupon interest and delayed conversion of FCCBs into equity. Proceedings were instituted before the High Court of Justice, Business & Property Courts of England & Wales, Commercial Court.

By its final judgment dated 1 April 2022 and ancillary order dated 20 May 2022, the English Court held Prakash Industries liable and awarded:

“USD 11,230,700 as Early Redemption Amount with interest at 7.95%”

“USD 3,532,711.67 as damages for delay in conversion along with interest”

Costs and future interest at 8% per annum.

No appeal was filed. The decree attained finality under English law. Peter Beck approached the Delhi High Court under Section 44A CPC for execution.

“It Is to the Reciprocal Advantage of Courts of All Nations to Enforce Foreign Rights”

The Court first reaffirmed that the United Kingdom is a “reciprocating territory” and that the English Commercial Court is a “Superior Court” within the meaning of Section 44A CPC.

Relying on Alcon Electronics v. Celem S.A., the Court reiterated the Supreme Court’s observation:

“It is to the reciprocal advantage of the courts of all nations to enforce foreign rights as far as practicable.”

The judgment debtor attempted to invoke Section 13(c) and 13(f) CPC, arguing that the decree was in violation of FEMA and RBI’s Master Direction–ECB and therefore contrary to Indian law and public policy.

Justice Amit Bansal rejected the foundation of this objection, observing:

“A foreign court cannot be expected to take cognizance of an Indian statute, unless it has been pointed out by a contesting party.”

Since FEMA objections were never raised before the English Court, and the matter was contested on merits, the decree could not be attacked at the execution stage on that ground.

Interest Within Ceiling: “7.95% Clearly Falls Within the Cap of 2%”

A central contention was that interest awarded by the English Court exceeded the ‘all-in-cost ceiling’ prescribed under paragraph 2.1(vi) and 2.1(vii) of the Master Direction–ECB.

The Subscription Agreement provided for coupon interest at 5.95% and additional default interest at 2%. The Court noted that paragraph 2.1(vii) permits penal interest up to 2% over and above the contracted rate.

Viewed in this light, the Court held:

“The interest awarded by the English Court on the ERA at the rate of 7.95%, clearly falls within the cap of 2% provided under paragraph 2.1(vii) of the Master Direction-ECB.”

Therefore, there was no violation of FEMA in respect of Early Redemption Amount and interest.

“Damages for Breach of Contract Cannot Be Subjected to FEMA Caps”

The more substantial issue concerned damages awarded for delayed conversion of FCCBs. RBI, in its affidavit, contended that damages linked to ECB transactions must also comply with the 2% ceiling.

The Court firmly rejected this interpretation.

“Damages awarded by a competent Court, whether Indian or foreign, towards breach of contract, cannot be subject to ceilings prescribed under FEMA and/or RBI directions.”

Justice Amit Bansal carefully analysed paragraph 2.1(vii), which refers to “prepayment charge/penal interest” and not damages. The Court held that by no stretch of imagination can judicially determined damages be equated with contractual penal interest.

The Court drew strength from NTT Docomo Inc. v. Tata Sons Limited, where it was held:

“What was awarded… were damages… It is not open to RBI to re-characterise the nature of the payment.”

Although that case concerned a foreign arbitral award, the Delhi High Court held that the principle equally applies to foreign court decrees.

The Court further relied on Ultrabulk, reiterating that transactions violating FEMA are not void and ex post facto permission can be obtained.

Remittance to Euro Account Permissible

Prakash Industries also objected to remittance on the ground that the account furnished by Peter Beck was not a “registered bondholder account.”

RBI clarified that payment to the specified Euro account was not barred under FEMA. The Court accepted this clarification and directed the Registry to remit the deposited amounts with accrued interest to the IBAN account provided by the decree holder, and directed Prakash Industries to remit the remaining amount directly.

“Objections Filed Solely to Cause Obstruction”: Costs Imposed

In a pointed observation reflecting judicial disapproval of dilatory tactics, the Court held:

“The objections raised… are completely devoid of merits and have been filed solely to cause obstruction and to cause delay in the execution of the Foreign Decree.”

Accordingly, objections were dismissed with costs of ₹1,00,000 payable to the decree holder.

Strengthening India’s Pro-Enforcement Jurisprudence

This judgment is a strong reaffirmation of India’s commitment to the principle of comity of courts and enforcement of foreign commercial rights. By holding that FEMA and RBI directions cannot be used as a post facto shield to defeat substantive rights crystallised by a foreign court, the Delhi High Court has sent a clear message to judgment debtors seeking to resist execution through regulatory objections.

The ruling strengthens India’s position as an enforcement-friendly jurisdiction in cross-border commercial disputes and clarifies that Section 13 CPC exceptions cannot be expansively invoked to re-open adjudicated liabilities.

Date of Decision: 23 February 2026