Foreign Guarantee and FEMA

If the said guarantee declaration had been executed by the respondent in breach of any provisions of FEMA or FERA, the respondent could be prosecuted for the same. But, it could not be said that the guarantee was null, void or could not be enforced on that ground.

There was no doubt that a debt was owed by the respondent to the petitioner and, further the petitioner did not have to wait to obtain a decree from civil court on the basis of the guarantee declaration.

[2011] 106 SCL 433 (delhi)



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Guarantee - when the debt accrues

The liability of the guarantor would not arise until (a) the borrower has failed; and (b) a notice of demand has been served on the guarantor. Only then can it be said that the debt would accrue. 1981 51 comp cases 301


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Implied exclusion of Part I

 Where both the seat of arbitration is abroad and the law governing the contract is foreign, an implied exclusion of Part I can be presumed according to the dicta of the Delhi and Bombay High Court (Max India Ltd. v. General Binding Corporation (2009) 3 Arb LR 162 (DEL) (DB) , DGS Realtors Pvt. Ltd. v. Realogy Corporation MANU/DE/2115/2009 and Frontier Drilling A.S. v. Jagson Internatural Ltd  (2003) 3 Arb. LR 548). The Delhi and Bombay High Courts’ views work on the presumption that where the proper law of contract is foreign and seat is abroad, the proper law of arbitration agreement can reasonably be presumed to be foreign

But see:  National Aluminium Company Limited v. GERALD Metals 2004(2)ARB LR 382 (AP).

Merely specifying the seat of the arbitration to be foreign without specifying the proper law of contract does not amount to an implied exclusion of Part I. (Bhatia International v. Bulk Trading S.A.: 2002 (4) SCC 105)

Merely specifying the proper law of contract to be foreign without specifying the seat of arbitration or proper law of arbitration does not amount to an implied exclusion of Part I. (Indtel Technical Services Private Ltd. v. W.S. Atkins Rail Ltd.: 2008 (10) SCC 308  and Citation Infowares Ltd. v. Equinox Corporation: 2009 (7) SCC 220


Overall See:  Dozco India P. Ltd. v. Doosan Infracore Co. Ltd.:  MANU/SC/0812/2010