Traditional conflicts of law rules regarded limitation as a matter of procedure that would be governed by the lex fori., i.e., by local law. This was the stated private international law position as declared by several judgements of the Indian courts.
The recent Supreme Court judgment in Bank of Baroda v/s Kotak Bank Ltd, has broken new ground by characterizing limitation as a substantive requirement as opposed to being merely procedural . The upshot is that the period of limitation for enforcement of a foreign judgement in a reciprocating territory is now no longer determined by Indian law but instead depends on the law of limitation of the foreign forum.
The Appellant, i.e. Bank of Baroda, commenced proceedings against the predecessor of Kotak (Vyasa Bank) on 19.04.1993 in London on a dispute relating to a letter of credit. Bank of Baroda's action was decreed by the High Court of London for an amount of US $ 1,267,909.26 along with interest. The English decree was unchallenged and attained finality in England.
In 2009, the Appellant Bank (14 years after the decree was passed by the London Court) sought to execute the English judgement in India, as a foreign decree in terms of Section 44A, read with Order 21 Rule 3 of the Code of Civil Procedure, 1908, (CPC).
The Appellant's execution petition was predictably opposed and dismissed by the City Civil Court in Mumbai on the ground that it was beyond the 12-year period of limitation, prescribed by Article 136 of the Limitation Act, 1963. The Bombay High Court upheld the view of the Trial Court and agreed that the execution application was time barred.
Leave to appeal was sought and obtained by the Supreme Court, which observed that the case gave rise to three important questions of law: i) does Section 44A of the CPC merely provide the manner of execution of foreign decrees or does it indicate the period of limitation for filing of execution proceedings; ii) what is the period of limitation for executing a decree passed by a foreign court in India; iii) from which date does the period of limitation run in relation to a foreign decree sought to be executed in India?
The Supreme Court on analyzing the provisions of Section 44A of the CPC found it to be an enabling provision which allows an Indian Court to execute a foreign decree of a reciprocating territory, as if the decree had been passed by an Indian Court. The Supreme Court rejected the Appellant's argument that an enforcement action under Section 44A of the CPC gives rise to a fresh period of limitation. The Supreme Court restricted the applicability of Section 44A to the procedure to be followed for execution of foreign decrees of reciprocating territories by Indian Courts.
The Court went on to analyze from a private international law standpoint what law would determine the period of limitation i.e. whether the law of the cause country i.e. English law in this case would be applicable or whether the law of the forum i.e. Indian law would be applicable.
The Court referred to commentaries on conflict of laws and concluded that the law of limitation could not be regarded as procedural law as it deals with extinguishment of rights or remedies of the parties .
The Court took note of judgments of the Supreme Court of Canada and the High Court of Australia which unequivocally held that the law of limitation is a substantive requirement . The Court on finding that the prevalent international judicial view supports the theory that the limitation period of the cause country should be applied even in the forum country, introduced and applied this principle to Indian conflicts of law rules. It held that the limitation period in executing a decree passed by a foreign court (from a reciprocating territory) in India will be the limitation period prescribed in the reciprocating foreign territory and not Indian law. In this case, the Indian court applied the 6-year period of limitation prevalent in England and found the Appellant's enforcement action time barred.
The Supreme Court explained that Article 136 of the Limitation Act, 1963, which prescribes a 12-year period of limitation would not be applicable to the execution of foreign decrees as that provision applied only to decrees passed by an Indian Court. The limitation period according to the Supreme Court would commence from the date the decree was obtained in the foreign jurisdiction and the limitation period would be determined by the law of country where the decree was passed. The Court clarified that a judgement creditor cannot take advantage of the limitation law prescribed in the forum country to extend the statutory period of limitation in circumstances where the decree was already time barred in the country of its origin.
In an interesting twist, the Court considered a situation where a decree sought to be executed in its country of origin, within the limitation period was not fully satisfied. In such a situation, the Court reasoned that the judgement creditor in order to fully satisfy the foreign decree, could commence execution proceedings in India within a period of three years (under Article 137 of the Limitation Act) from the date of finalization of the execution proceedings in the cause country.
The judgment is a reminder to foreign judgement creditors to ensure that enforcement in India conforms to the limitation period in the requisite foreign jurisdiction and is not determined by local law. The ruling also demonstrates the commitment of the Indian judiciary to align its conflict of laws principles to that which is internationally prevalent.
Originally published 31 July, 2020
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