The Apex Court ruled that the application for executing a foreign decree will be covered under Article 137 of the Limitation Act and the applicable period of limitation would be 3 years. Whilst observing that the law of limitation is not merely a procedural law, the court addressed two possible scenarios for reckoning the period of limitation. Limitation would start running from the date the decree was passed in the foreign court of a reciprocating country if the decree holder does not take any steps for execution of the decree during the period of limitation prescribed in the cause country for execution of decrees in that country. However, if the decree holder first takes steps in aid to execute the decree in the cause country, and the decree is not fully satisfied, then a petition for execution can be filed in India within a period of 3 years from the finalisation of the execution proceedings in the cause country. The court also clarified that applying in the cause country for a certified copy of the decree or the certificate of part satisfaction, if any, of the decree, will not tantamount to step in aid to execute the decree in the cause country.
The Supreme Court of India, in its judgment ‘Bank of Baroda v. Kotak Mahindra Bank Ltd.'1 dated 17.03.2020, settled the controversy revolving around the limitation period applicable for filing an application for execution of a Foreign Decree passed by the ‘superior courts' of a ‘reciprocating territory', for the purpose of Section 44-A of the Code of Civil Procedure, 1908 (‘the Code'). Until now, the courts around the country struggled with this issue for lack of clarity and conflicting positions adopted by different High Courts. The Supreme Court in this case, took note of the two contrasting views taken by the Madras High Court in the case of Sheik Ali v. Sheik Mohamed 2 and the High Court of Punjab & Haryana in Lakhpat Rai Sharma v. Atma Singh3, and put the debate to rest.
In the matter of Sheik Ali, the Madras High Court in Paragraph (19) observed that the Limitation Act of India would apply only from the date of filing of a certified copy of the Foreign Decree passed by the Court of the ‘reciprocating territory' under section 44A(1) of the Code. On the contrary, the High Court of Punjab & Haryana in Lakhpat Rai Sharma in Paragraph (4) opined that the limitation period for the execution of the Foreign Decree in India begins from the date on which the reciprocating country has passed the Foreign Decree.
On request of M/s Aditya Steel Industries Limited, Vysya Bank, which is the predecessor of Kotak Mahindra Bank Ltd. (‘the Respondent Bank'), issued the letter of credit for US $ 1,794, 258 in favour of M/s Granada Worldwide Investment Company, London. Acting on the instructions of the Vysya Bank, London Branch of Bank of Baroda (‘the Appellant Bank') honoured the letter of credit. It made payment of US $ 1,742,376.41 to M/s Granada Worldwide Investment Company on 13.10.1992.
On 19.04.1993, the Appellant Bank filed a money recovery suit against the Vysya Bank before the High Court of Justice, Queens Bench, and Divisional Commercial Court of London (‘the London Court'). Pursuant to the recovery suit, on 20.02.1995, the London Court passed a Decree of US $ 1,267,909.26 along with interest, in favour of the Appellant Bank.
On 05.08.2009, the Appellant Bank initiated the execution proceedings based on the Decree passed by the London Court against the Respondent Bank before the Additional City Civil & Session Judge, Bangalore (‘the Trial Court'). The Trial Court dismissed the execution proceeding on ground of being time barred in terms of Article 136 of the Limitation Act, 1963. The Trial Court held that the Appellant Bank should have commenced the execution proceedings within 12 years from the date of passing of the money Decree by the London Court.
The Appellant Bank challenged the judgment of the Trial Court before the High Court of Karnataka. The High Court dismissed the appeal and upheld the view of the Trial Court. Aggrieved by the High Court's judgment, the Appellant approached the Supreme Court with this civil appeal for the determination of the issue of the limitation for applying to execution of a Foreign Decree of a reciprocating country in India.
Issues framed by the Supreme Court
- Section 44A of the Code, merely provides for the 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 country) in India?
- From which date will the period of limitation run in relation to a Foreign Decree (passed in a reciprocating country) sought to be executed in India?
The first issue that came before the Supreme Court for its consideration was whether Section 44A of the Code provides for the period of limitation for filing execution proceedings of Foreign Decree passed by the Courts of the reciprocating country. The Supreme Court answered this question in the negative and held that Section 44A has nothing to do with the period of limitation. Section 44A is only an enabling provision that empowers the District Court to execute the Decree as if it was passed by the said District Court or any other Indian Court of competent jurisdiction.
While dealing with this issue, the Supreme Court referred to the Madras High Court judgment in Sheik Ali and observed that the view taken by the Madras High court that a fresh limitation will start on the filing of a certified copy of the Foreign Decree is incorrect. The Supreme Court accepted only the following view of the Madras High Court:
“...(19) To sum up our conclusions, we are of the view that Section 44-A(1) is confined to the powers and manner of execution and has nothing to do with the law of limitation. The fiction created by the Sub-section goes no further and is not for all purposes, but is designed to attract and apply to execution of foreign judgments by the District Court its own powers of execution and the manner of it in relation to its Decrees, without reference to limitation.”
Further, the Supreme Court also observed that the District Court, to execute a Foreign Decree, shall follow the same procedure laid down in Section 47 and Order 21 of the Code.
The next question addressed by the Supreme Court was about the limitation period for executing a Foreign Decree in India. To answer this question, the Court framed another crucial question, i.e. whether the law of limitation in the cause country (the country in which the Decree was passed, in the present case, England) or forum country (the country in which the Decree is sought to be executed, in this case, India) would apply?
The Supreme Court denied the old position under common law and the earlier view taken by the Indian Courts that the law of limitation concerns only the procedure, hence the law of the forum country would apply. The Supreme Court by virtue of the transition in the views of international society relating to the limitation law held that the statute of limitation is a substantive law as it deals with the extinguishment of rights or remedies, thereby, the limitation law of the cause country would apply for executing a Decree passed by the reciprocating territory in the forum country. The Supreme Court however clarified that in case law of cause country is silent on period of limitation with regard to execution of decrees then period of limitation provided in forum country will apply.
With regard to the third and final question, the Supreme Court held that the application for execution of a Foreign Decree would be governed by the limitation period prescribed under Article 137 of the Limitation Act, 1963, i.e., three years and not as prescribed under Article 136 which mandates for the limitation period of 12 years. The Supreme Court observed that Article 136 would apply only to the Decree passed by the Indian Courts. Further, the Supreme Court explained that the executing Court could not execute a Foreign Decree unless the Decree-Holder provides certain information of the Judgment Debtor like its address, properties, etc. This information will have to be provided by way of a written Application under Order 21 Rule 11 Clause 2 of the Code. Thus, by this reasoning, Article 137 will apply, and the limitation for filing execution application of Foreign Decree would be three years. It has been further held that in case the period of limitation in the cause country is higher than the period provided in India (3 years in this case) then such higher period will apply for the purpose of execution in India, thereby, giving due recognition to the limitation period of the cause country.
On the question as to from when the period of limitation starts to run , the Supreme Court considered two scenarios that may arise. First, where the Decree-Holder does not take any steps for execution of the Decree in the cause country according to the limitation law of that country, in such a scenario, the limitation period shall begin from the date on which the Court of the ‘reciprocating territory' (cause country) passed the Decree. However, the situation may arise in which the Decree-Holder takes steps for execution of the Decree in the cause country within the limitation period of that country and the Decree gets satisfied partly and not fully. To satisfy the rest of the Decree, the Decree-Holder may file an Application for execution of the rest of the Decree in the forum country. In such eventuality, where the Decree-Holder takes step-in aid to execute the Decree in the cause country, and the decree remains unsatisfied then, the right to apply will accrue on the date on which the execution proceedings in the cause country becomes final. The Decree-Holder may file an application for execution under Section 44A of the Code within three years of such finalization of the execution proceedings in the cause country.
Furthermore, the Supreme Court clarified that applying for a certified copy of a decree or the certificate of part-satisfaction in the cause country, will not tantamount to step-in-aid to execute the Decree in the cause country.
Without a doubt, this judgment of the Supreme Court of India is a much-awaited judgment that settled the issue concerning the limitation period for filing an Application under Section 44A for the execution of a Foreign Decree passed by the Court of a ‘reciprocating territory'. Further, the Supreme Court by this judgment has tried to keep pace with the principle of comity and conflict of laws in international jurisprudence by acknowledging that the law of limitation is substantive and not merely a procedure.
1 2020 SCC OnLine SC 324
2 AIR 1967 Mad 45
3 AIR (58) 1971 P&H 476
Originally published 03 August, 2020
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