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Hyderabad: A man who allegedly siphoned company funds into his personal account in Sharjah and then returned to India cannot escape a United Arab Emirates (UAE) court order against him simply because it was passed in his absence, the Telangana High Court has ruled.

The court held that a money decree passed by the Federal Court of Sharjah is fully enforceable in India, and that an Indian judgment debtor cannot use the excuse that he “was not present” in the foreign court to wriggle out of paying up.

The case

The dispute goes back to a business partnership in Sharjah involving a company that traded in medical equipment. The person who filed the case (decree holder) initially owned 90 per cent of the company, with the other party holding the remaining 10 per cent.

According to the decree holder, after a share transfer arrangement, the other party fraudulently transferred funds from the company’s account into his own personal account, essentially helping himself to money that was not his.

The Sharjah court appointed an independent accounting expert to examine the books. The expert’s report, submitted in November 2022, found that funds amounting to AED 1,079,000 had been transferred from the company’s account to the accused’s personal account. Based on that finding, the Federal Court of Sharjah in May 2023 ordered him to pay AED 971,000 with five per cent interest, plus AED 34,550 towards legal costs.

The decree holder then got permission from the Sharjah court to enforce this order outside the UAE, and initiated proceedings in India to attach and sell the man’s immovable property here to recover the money.

How the accused tried to fight it

The judgment debtor threw every available argument at the Indian court. He said the Sharjah court had no jurisdiction over him. He claimed he was an Indian citizen who never actually lived in the UAE at the relevant time. He argued that summons were never properly served on him. 

Crucially, he contended that since the decree was passed ex parte, or without him being present, it could not be treated as a decree passed “on merits” and therefore should not be enforceable in India.

Under Indian law, specifically Section 13 of the Code of Civil Procedure, a foreign judgment is not binding if it was not passed on the merits of the case. The accused leaned heavily on this provision.

Court rejects arguments

A division bench of Justice Moushumi Bhattacharya and Justice Gadi Praveen Kumar did not buy the argument.

On the question of enforceability, the court noted that India had officially notified the UAE as a “reciprocating territory” in January 2020, which means decrees from superior UAE courts can be directly executed in India, just as decrees from Indian courts can be executed in the UAE. That settled the first question.

On the more substantive argument that the decree was not “on merits” because it was passed ex parte, the court drew a clear distinction. An ex parte decree, it held, does not automatically mean it was passed without examining the facts. What matters is whether the foreign court actually looked at the evidence before it and applied its mind.

In this case, the Sharjah court had done exactly that. It had considered the accounting expert’s report, examined the contractual relationship between the parties and applied the relevant legal provisions before passing the decree. The fact that the defendant chose not to appear did not make the judgment any less grounded in evidence.

On the question of notice

The court also rejected the claim that the summons had not been properly served. The decree holder pointed out that the Sharjah court had issued notice through multiple channels permitted under UAE law – direct court service, email and publication in both Arabic and English newspapers. Significantly, the accused never denied that the email address used for service was his.

The High Court upheld the order of the Commercial Court, which had already allowed the execution petition and directed the attachment and sale of the man’s property in India.

In simple terms, the ruling means that an Indian who does business abroad, allegedly defrauds a partner and then comes back home, cannot use Indian courts as a shield against a foreign judgment, at least not when that judgment was based on solid evidence and passed by a court in a country that India recognises as a reciprocating territory.