Even after pursuing a legal battle for years and obtaining a decree from the court, parties are faced with yet another task- enforcement of the decree. This task becomes all the more herculean when it involves a party seeking to invoke the Indian courts' jurisdiction for the purposes of enforcement of a decree passed by a foreign court. The first and foremost issue that would naturally arise for consideration while planning such litigation strategy is - when to approach the executing forum?
With increasingly fading boundaries, there has been a sharp rise in cases where Indian parties are involved in cross border transactions. This has led to a corresponding increase in the number of disputes and therefore more foreign decrees are being sought to be enforced in Indian courts. Under Indian Law, foreign decrees passed by the courts of reciprocating territories1 are to be enforced in terms of Section 44-A of the Code of Civil Procedure, 1908 (the "Code").
Despite the existence of an express provision, there has been considerable uncertainty and in fact, contrary views have been taken by the High Courts in India regarding the period of limitation that ought to be applicable to matters pertaining to enforcement of a foreign decree.
The Supreme Court of India, noticing this uncertainty and variance, has sought to finally clarify the position in the Bank of Baroda vs. Kotak Mahindra Bank Limited2 (the "Bank of Baroda case"). In this article, we seek to discuss the law relating to ascertainment of period of limitation for seeking enforcement of a foreign decree in India.
2. LAW OF LIMITATION FOR SEEKING ENFORCEMENT OF A FOREIGN DECREE IN INDIA- POSITION IN INDIA TILL DATE
Courts in India have consistently considered the law of limitation as a procedural law.3 It may be noted that earlier, most common law jurisdictions also expounded the same view, that is, the law of limitation is procedural and not substantive. It is for this reason that the law of the country where a decree is sought to be enforced (the "Forum Country") was applicable.
In India, while this position has been consistent, the issue that arose before the various High Courts was whether Article 136 or Article 137 of Schedule I of the Limitation Act, 1963 (the "Act"), that is, twelve years or three years respectively, would be applicable. This was, obviously, without regard to the limitation period which may be provided for in the country where the decree was passed (the "Cause Country").
On one hand, India has a series of cases such as Sheik Ali v. Sheik Mohamed,4 wherein the Madras High Court has taken the view that even though Section 44-A of the Code makes the procedure for execution of Indian decrees equally applicable to execution of foreign decrees, Article 136 of the Act cannot be applicable. Therefore, it was held that the only applicable provision will be Article 137 of the Act, that is, the period of limitation will be 3 (three) years from the date on which the right to apply accrues.
However, on the other hand, there is a series of cases such as Lakhpat Rai Sharma v. Atma Singh,5 wherein the Punjab & Haryana High Court took the view that Section 44-A of the Code treats a foreign decree as an Indian decree, for all purposes. Therefore, it was observed that Article 136 of the Act will be applicable, that is, twelve years from the date on which the right to apply accrues. The common origin for both the above line of decisions is that the law of limitation, in India, is interpreted as a procedural law.
However, the laws across the globe, including common law nations have been slowly moving away from this concept. In fact, the Law Commission of India (the "LCI") in its 193rd Report (the "Report"),6 itself, took note that the position in India with regard to the application of limitation period for enforcement of a foreign decree is contrary to the position in most commonwealth countries which considers the law of limitation as substantive law.
In the Report, the LCI recommended an amendment to provide that in respect of decrees passed in reciprocating foreign countries, which are sought to be enforced in an Indian Court, the law of limitation as prevalent in the Cause Country would apply.
3. LAW OF LIMITATION FOR SEEKING ENFORCEMENT OF A FOREIGN DECREE- POSITION ABROAD
As noted above, the countries that follow civil law have considered limitation to be substantive law and therefore, when it comes to enforcing a foreign decree, they have applied the law of the Cause Country. Over time, even common law countries have been moving towards this concept and a harmony is being evolved globally that limitation is a matter of substantive law.
Below are examples of certain common law as well as civil law jurisdictions and their respective laws that govern the issue of limitation qua enforcement of foreign decrees in their respective jurisdictions.
3.1. United Kingdom
In the United Kingdom, the Foreign Limitation Periods Act, 1984 changed the erstwhile position that the law of limitation is procedural and provides that the law of limitation of the Cause Country shall apply to proceedings relating to enforcement of foreign decrees.7
Various states of Australia such as Victoria, New South Wales and Queensland, among others, have enacted the respective Choice of Law (Limitation Periods) Act, 1993. The statute was enacted by Australian states in acceptance of the minority view taken in the case of Mc Kain Vs. RW Miller & Company (SA) Pty Ltd.8 It provides that the limitation law of the Cause Country is to be regarded as part of the substantive law and therefore applied by the court.9
3.3. United States of America
Several States in the United States of America have adopted the Uniform Conflict of Laws Limitation Act, 1982, which provides that if a claim is substantively based on the law of any other state, then the limitation period of that state would apply.10
4. BANK OF BARODA CASE
Until recently, the law of limitation was considered as procedural in nature thereby leading to the consequent uncertainty in law, in India. However, the above position has undergone a change recently as the Supreme Court in the Bank of Baroda case, while dealing with an application seeking enforcement of a decree passed by the High Court of Justice, Queens Bench, Divisional Commercial Court of London (the "London Court") held that the law of limitation is substantive, rather than procedural law.
The Supreme Court was faced with the issue of an application for execution of a foreign decree, under Section 44-A of the Code, after almost 14 years from the date when the decree was passed by the London Court. Both the courts below were of the view that limitation being a procedural law, Article 136 of the Act, that is, a limitation period of 12 years, ought to be applicable from the date on which the foreign decree was passed.
The Supreme Court, after clarifying that Section 44-A of the Code is merely an enabling provision and does not give rise to a fresh cause of action to execute a foreign decree, proceeded to delve into the issue of whether limitation ought to be an issue of procedural or substantive law. To aid its finding that limitation can no longer be considered as procedural law, the Supreme Court referred to the evolution of the law in United Kingdom as well as USA and further took support of the Report.
Further, the Supreme Court, after discussing various academic texts, gave credence to the evolution of the law across the world and therefore affirmed the view that the law that governs the validity of a contract or decides a parties rights and liabilities arising out of a contract, ought to be the law that governs when those rights stand extinguished. In other words, unless there is an express provision in the Forum Country pertaining to the limitation period regarding enforcement of a foreign decree, it is the law of the Cause Country that ought to govern the law of limitation.
Additionally, the Supreme Court also held that the limitation period prescribed under Article 136 of the Act only deals with decrees passed by Indian courts and the wordings of the said provision do not extend to foreign decrees. Furthermore, the Supreme Court held that the language is imperative as the legislature at the time of enactment of the Act in 1963, was deemed to be aware of Section 44-A of the Code. Despite the same, it did not expressly make Article 136 of the Code applicable to foreign decrees.
In view of its analysis, the Supreme Court laid down two principles to determine the limitation period for enforcement of foreign decrees, that is, firstly, where no step has been taken in the Cause Country for enforcement, the limitation period will commence from the date on which the decree was passed and the applicable law of limitation shall be that of the Cause Country.
Secondly, in cases where a party has sought part-enforcement of a decree in the Cause Country itself and thereafter approached an Indian court for enforcement of the remainder of the decree, the period of limitation will commence from the conclusion of the execution proceeding in the Cause Country and the applicable law will, in view of the absence of any other provision in the Act, be the residual provision, that is, Article 137 of the Act.
The Supreme Court also took note that, if the law of limitation in India would have continued to be considered as procedural law, it would have continued to create incongruous situations where parties which would have lost their remedy to execute a decree in the courts of the Cause Country, due to expiry of the limitation period, would still be permitted to seek execution of the said decree in an Indian Court- which is a form of 'forum shopping'. The judgment now rectifies this error and aims to rule out any such eventualities.
There is a catena of decisions of the Supreme Court, including three Judge Bench decisions, which have consistently upheld the general position that the law of limitation is procedural and not substantive law. While the Bank of Baroda case settles the position that in cases of enforcement of foreign decrees, the law of limitation is substantive, it also proceeds to make observations that the aforesaid general position of law is due for a change. The impact of this decision is far reaching as up until now the evolution of Indian jurisprudence has been on the basis that the law of limitation is procedural.
For instance, foreign awards are deemed to be enforced as decrees passed in India and therefore the period of limitation to seek its enforcement is governed by Article 136 of the Act.11 However, it appears that the principles laid down in the Bank of Baroda case may extend to foreign awards as well. Additionally, when dealing with interpretation of statutes, the courts have repeatedly held that the law of limitation, being procedural in nature, ought to be applied with retrospective effect. This understanding has been applied even to cases under the Insolvency and Bankruptcy Code, 2016.
However, in view of the Bank of Baroda case it remains to be seen whether, in the honest attempt to bring India at par with the international best practices, has the Supreme Court tipped the proverbial domino which may now require a re-look at innumerable decisions that have been based on the erstwhile position that the law of limitation is procedural. In view thereof, it is likely that a larger bench may need to clarify the position whether, under the general law, the law of limitation is to be considered as a procedural or substantive.
Notwithstanding the above, it is laudable that the Supreme Court has taken the commercial realities and global best practices into consideration and brought the Indian law in sync with foreign jurisdictions. The intent of the Supreme Court is evident that it is working towards creating a commercially sound and a globally friendly legal framework. Since India is amongst the fastest growing economies and a sought after FDI destination, such steps are vital and the legal ecosystem in India must continue to evolve with other major economies across the globe.
1. Explanation 1 of Section 44-A of the Code provides that the Central Government may, declare any country or territory outside India by notification in the Official Gazette to be a 'reciprocating territory'.
2. Civil Appeal No.2175 of 2020.
3. BK Education Services Private Limited v. Parag Gupta and Associates, Civil Appeal No. 23988 of 2017; NNR Global Logistics (Shanghai) Co. Ltd. v. Aargus Global Logistics Pvt. Ltd., OMP No. 61 of 2012.
4. AIR 1967 Mad 45.
5. AIR 1971 P&H 476.
6. Law Commission of India, 193rd Report on Transnational Litigation- Conflict of Laws- Law of Limitation, June 2005.
7. Section 1.
8.  HCA 56.
9. Section 5, Choice of Law (Limitation Periods) Act 1993.
10. Section 2, Uniform Conflict of Laws Limitation Act, 1982.
11. Compania Naviera 'Sodnoc' vs Bharat Refineries Ltd., AIR 2007 Mad 251; Cairn India Ltd & Ors vs Government of India, OMP (EFA) (Comm) No. 15 of 2016 dated 19 February 2020.
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