As of today, money decrees passed by superior courts in reciprocating foreign countries are executable in India, as if they were a decree passed by the district court before which such execution is sought. However, this was not always the case. Before Section 44A was inserted in the Code of Civil Procedure, 1908 (CPC), a decree passed by any foreign Court in a foreign country could not be executed as it is, in India. A suit was required to be filed on the basis of the judgment passed by a foreign court, before it could be enforced in India.
The Central Government enlists 'reciprocating territories' from time to time, by way of notification in the Official Gazette of India. It also indicates which courts qualify as 'superior courts' with respect to such 'reciprocating territories'. Money decrees passed by the specified courts in 'reciprocating territories' may then avail the benefit of simplified execution process under Section 44A of the CPC.
Recently, the Supreme Court of India in Bank of Baroda v. Kotak Mahindra Bank Ltd. 1 has shed some light on the limitation period applicable to execution of foreign decrees under Section 44A; an issue that lower courts had been struggling to resolve until now.
The appellant bank filed a suit against the respondent bank on 19 April 1993 in London, for recovery of its dues. Thereafter, a decree for USD 1,267,909.26 was passed by the High Court of Justice, Queens Bench, Divisional Commercial Court of London on 20 February 1995. The parties had negotiated an arrangement whereby the appellant had agreed to refrain from executing the decree. However, in 2009, the respondent bank filed an application under Section 44A of CPC for execution of the decree (almost 14 years after the decree was passed), before the Additional City Civil & Session Judge, Bangalore. The application was opposed by the respondent mainly on the ground that the same had not been filed within the period of limitation.
The lower courts had both dismissed the application petition as time barred, holding that Article 136 of the Limitation Act, 1963 (Limitation Act) applies and the execution petition should have been filed within twelve years of the decree being passed.
The following questions of law came up for consideration of the Supreme Court:
- Does Section 44A of CPC merely provide for manner of execution of foreign decrees, or does it also indicate the period of limitation for filing execution proceedings for the same?
- What is the period of limitation for executing a decree passed by a foreign court (from a reciprocating territory) in India?
- From which date will the period of limitation run in relation to a foreign decree (passed in a reciprocating territory) sought to be executed in India?
Findings of the Supreme Court
While addressing the first question, the Supreme Court outrightly rejected the argument that no limitation is applicable to foreign decrees sought to be executed under Section 44A, and that principles of delay and laches must apply. The proceedings in question being execution proceedings, and not writ proceedings, principles of delay and laches cannot be made applicable in this context.
The appellant also pleaded that limitation would only begin to run once a cause of action arises i.e., once an application for execution is filed under Section 44A of CPC. 2 The Supreme Court disapproved of this view and clarified that there is no concept of cause of action as far as an execution petition is concerned. Unlike a civil suit, an application for execution does not require a cause of action to arise for commencement of the limitation period, as it becomes enforceable the very same day that it is passed. Therefore, filing of an application under Section 44A will not reset the clock and create a fresh period of limitation.
As for whether the question of limitation has been dealt with under Section 44A of the CPC, the Supreme Court has opined that Section 44A is merely an enabling provision. It facilitates execution of a foreign decree by an Indian District Court, as if the decree were passed by it and does not deal with the aspect of limitation at all.
While analysing the second question, the Supreme Court drew a distinction between a 'cause country', where the action is originally brought and a decree is obtained; and the 'forum country' where the decree so obtained is sought to be executed. In the present factual background, England would be the 'cause country' and India is the 'forum country'. The moot question here was as to whether the law of limitation of the 'forum country' would apply, or the law of limitation of the 'cause country'. In order to answer this question, the Supreme Court delved into the evolution of jurisprudence on limitation internationally, to trace how limitation went from being a procedural matter, to becoming a substantive matter. 3
At present, the view worldwide appears to be that the law of limitation of the 'cause country' should be applied in the 'forum country' as well. The Supreme Court went on to observe that in cases where the remedy available in law stands extinguished in the 'cause country', it virtually extinguishes the right of the decree holder to execute the decree and creates a corresponding right in the judgment debtor to challenge the execution of the decree. These being substantive rights, cannot be treated as being simply procedural. In consideration of the fact that India is becoming a global player in the international business arena, the Supreme Court was of the opinion that India cannot be one of the few countries where the law of limitation is considered to be entirely procedural. Therefore, it is settled that limitation prescribed in laws of the 'reciprocating territory' is applicable in India at the time of execution of a foreign decree.
With regard to the third question, the Supreme Court examined Articles 136 and 137 of the Limitation Act and concluded that Article 136 only deals with decrees passed by Indian Courts. The Limitation Act is tailormade primarily for suits, appeals and applications to be filed in Indian Courts. Consequently, wherever the Limitation deals with something outside the confines of the Indian territory, it specifically carves out the situation to which its provisions may apply. The Supreme Court observed that Article 39 of the Limitation Act specifically deals with dishonoured foreign bills, and Article 101 deals with suits filed upon a judgment including a foreign judgment.
In view of the language used in Article 101 of the Limitation Act, the Supreme Court opined that legislators may as well have used the phrase "including a foreign decree" while dealing with execution of decrees, had the intent been to extend the application of Article 136 to foreign decrees. However, this is not the case. Applications for execution of foreign decrees would therefore fall within the purview of the residual provision under Article 137 of the Limitation Act.
Having said that, the Supreme Court went on to carve out the two kind of scenarios that may be envisaged when it comes to execution of foreign decrees. Firstly, there may be cases wherein the decree holder does not take any steps for execution of the decree in the 'cause country' within the period of limitation prescribed in that country. Such decree holder would thereby lose its right of execution of the decree in question in the 'cause country'. It would therefore lead to no logical or just end if such a decree holder is then allowed to exercise the benefit of securing execution of the decree in question elsewhere. The limitation period in such cases would be as prescribed under the laws of the 'cause country' and would be deemed to have commenced on the date of passing of the decree in the 'cause country'.
In the second scenario, there may be cases wherein the decree holder takes steps-in-aid for execution of the decree in the 'cause country', and the decree may be executed only partially as the judgment debtor may not have sufficient property or funds in the 'cause country' to satisfy the decree. In these cases, the right to file an application under Section 44A would accrue in the decree holder only after the execution proceedings in the 'cause country' have been concluded. From the date of conclusion of such execution proceeding in the 'cause country', the decree holder may make an application under Section 44A before a District Court of relevant jurisdiction in India, within a period of three years, in accordance with the limitation prescribed under Article 137 of the Limitation Act. For clarity, the Supreme Court has also specifically advised that simply applying in the 'cause country' for a certified copy of the decree or the certificate of part satisfaction, if any, of the decree, as required by Section 44A will not tantamount to steps-in-aid of executing the decree in the 'cause country'. Therefore, the time spent in obtaining such certified copies would not be exempted from consideration while calculating the limitation period.
The clarity provided by the Supreme Court in this regard is a welcome relief. The alternative conclusion would pave way for an absurdity wherein a litigant may sleep on a decree for a hundred years, and then seek execution of that decree in a 'forum country'. This judgment also clears the air with respect to conflicts between laws of limitation in a 'cause country' and a 'forum country', and indicates the event that triggers commencement of limitation period in each case. We believe that this judgment is an important milestone which enables the jurisprudence on limitation in India to level with the internationally accepted position.
1 Civil Appeal No. 2175 of 2020 @ SLP (Civil) No. 8123 of 2015, Decided on 17 March 2020.
2 Reliance was placed on Sheik Ali v. Sheik Mohamed, AIR 1967 Mad 45.
3 The Supreme Court discussed inter alia the change in Dicey's observations in the J.H.C. Morris, et. al., (Eds.), "Dicey's Conflict of Laws", 6th Edn., Stevens & Sons Ltd., Sweet & Maxwell, Ltd., pp.860-861 (1949); and Sir Lawrence Collins et. al., "Dicey, Morris, & Collins on The Conflict of Laws", 14th Edn., Sweet & Maxwell pp. 198-199 (2006).
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