Situs of debt for third party debt order (Hardy Exploration & Production (India) Inc v Government of India)

The case of Hardy Exploration & Production (India) Inc v Government of India [2018] EWHC 1916 (Comm) concerned an application for a discharge of an interim third party debt order, where the court provided detailed analysis of the principles to consider when deciding the situs of the debt for the purpose of a third party debt order. Written by Clifford Woodroffe, partner at Lee Bolton Monier-Williams.

What are the practical implications of this case?

HHJ Egger (sitting as a Deputy Judge in the High Court) provided useful guidance in the form of seven principles which should be considered when evaluating jurisdiction in the context of third party debt orders:

  • the court can make a third-party debt order only where the third party debtor is present within the jurisdiction and (a) debt is situated in the jurisdiction or (b) the debt is situated in another jurisdiction provided that it appears that by the law applicable in that foreign situs the English order would be recognised as discharging the liability of the third party to the judgment debtor
  • it is a generally recognised principle of international law that the courts of one state shall not trespass on the authority of another, by attempting to seize assets situated within the jurisdiction of the foreign state
  • the situs of the debt is necessarily linked to the law governing debts by generally accepted principles of private international laws
  • the principle determining the situs of debt is that debts or choses in action are generally to be looked upon as situate in the country where they are properly recoverable or can be enforced
  • the general rule or presumption is that the debt or chose in action is properly recoverable or enforceable in the place of residence, or domicile of the debtor
  • that general rule is open to displacement if it can be demonstrated that the relevant debt is properly recoverable or enforceable in a jurisdiction other than the debtor's residence or domicile
  • the approach to determining the situs of the debt will differ if the relevant debt has not yet been established by a judgment or arbitral award or has been so adjudged

What was the background?

In 2013 the claimant obtained an arbitration award from the Government of India in relation to a dispute over gas/oil exploration rights in Indian territorial waters. An enforcement order was made in 2017 (and which is subject to an appeal to be heard later this year). In February 2018, the claimant made a without notice application for an interim third party debt order under CPR 72. The interim third party debt order was granted since there existed a debt due or accruing by the third party to the judgment creditor and it prevented IIFC UK (the third party) paying a debt it owed to the Government of India in the amount of £70,528,107.04. IIFC UK's debt to the Government of India arose from interest payments due and payable every six months to the Reserve Bank of India under a bond subscription agreement.

IIFC UK applied for the discharge of the interim order on four grounds, although the judgment was only concerned with the grounds that (1) the debt owed by IIFC UK was enforceable in India and payment pursuant to an order of the English Court would not discharge the debt as a matter of Indian law; and (2) the debt owed by IIFC UK was not due or accruing due on the date the interim order was made.

What did the court decide?

The court decided it had no jurisdiction to make a third-party debt order. Firstly, the debt was situated in India not England and Wales; and second, it had not been established that the Indian Court would recognize IIFC UK's debt as being discharged by its compliance with the third party debt order.

HHJ Eggers reviewed numerous authorities to determine the situs of the debt, before setting out the above list of principles. Expert evidence was used to attempt to determine whether or not an Indian Court would recognize IIFC UK's debt as discharged, but the parties’ experts did not agree whether this would be recognized (it was not clear whether or not a jurisdiction agreement would be classed as valid).

Therefore the application to discharge the interim third party debt order was granted.

Case details

  • Court: High Court, Queen's Bench Division (Commercial Court)
  • Judge: Peter MacDonald Eggers QC
  • Date of judgment: 25 July 2018

Clifford Woodroffe is a partner at Lee Bolton Monier-Williams, and a member of LexisPSL’s Case Analysis Expert Panel. Suitable candidates are welcome to apply to become members of the panel. Please contact

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Filed Under: DR/Litigation

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