12 Jun 2020 6:14 AM GMT
In a recent judgment the Hon'ble Supreme Court delved into a significant question of limitation for filing an application for execution of a foreign decree of a reciprocating country in India. Apposite facts of the case: Visa Bank, the predecessor of the respondent Kotak Mahindra Bank Ltd.("respondent"/"KMBL"), issued a letter of credit for US $1,794,258 on behalf of its...
In a recent judgment the Hon'ble Supreme Court delved into a significant question of limitation for filing an application for execution of a foreign decree of a reciprocating country in India.
Apposite facts of the case:
Visa Bank, the predecessor of the respondent Kotak Mahindra Bank Ltd.("respondent"/"KMBL"), issued a letter of credit for US $1,794,258 on behalf of its customer M/s. Aditya Steel Industries Limited in favour of M/s. Granada Worldwide Investment Company, London. The appellant Bank of Baroda ("appellant" / "BOB") was the confirming bank to the said letter of credit. The Visa Bank issued instructions to the London branch of the appellant on 12.10.1992 to honour the letter of credit. Acting on this instruction the London branch of the appellant discounted the letter of credit for a sum of US $ 1,742,376.41 and payment of this amount was made to M/s Granada Worldwide Investment Company on 13.10.1992.
The appellant filed a suit against the Visa Bank for recovery of its dues on 19.04.1993 in London. This suit was decreed by the High Court of Justice, Queens Bench, Divisional Commercial Court of London on 20.02.1995 and a decree for US $1,267,909.26 along with interest thereon was passed in favour of the appellant bank and against Visa Bank. The decree was not challenged and became final.
On 05.08.2009, the appellant bank filed an execution petition in India, i.e. almost 14 years after the decree was passed by the London Court, for execution of the same in terms of Section 44A read with Order 21 Rule 3 of the Code of Civil Procedure, 1908 ( "Code') for recovery of Rs.16,43,88,187.86.
Fate of the execution petition before the courts below:
On 20.07.2013 the Additional City Civil & Session Judge, Bangalore acceded to the main contention of the respondent regarding limitation and dismissed the execution petition as time barred holding that Article 136 of the Limitation Act, 1963 ("the Act") applies and the execution petition should have been filed within 12 years of the decree being passed by the London Court. Aggrieved, the appellant bank approached the High Court, which vide judgment dated 13.11.2014 upheld the view of the trial court.
Rival submissions on behalf of the parties before Hon'ble Supreme Court of India ("SC"/"Apex Court"):
A. On behalf of the appellant, following points were urged before the SC:
i. The Act does not prescribe any period of limitation for execution of a foreign decree passed in a reciprocating country.
ii. In such eventuality, the principles of delay and laches, as applicable to writ proceedings, may apply. Replying on a list of dates, it was submitted that the appellant was pursuing the matter and was trying its best to get the matter settled with Visa Bank and, therefore, there was no delay in filing the execution petition.
iii. Since no limitation is provided under the Act, the cause of action for filing an execution petition arises only when a petition is filed under Section 44A of the Code, which provides that a decree passed by a court in a reciprocating country should be treated as an Indian decree and, therefore, the limitation period of 12 years provided under Article 136 of the Act applies only from that date because that is the date when the cause of action for filing of execution petition arises when the foreign decree is treated to be an Indian decree.
B. Per contra, on behalf of the respondent following submissions were made:
i. Law of limitation of England would apply in this case. The limitation period as per English Law is 6 years for execution of a decree, and hence the decree having been passed on 20.02.1995, no petition for execution of that decree could be filed after 20.02.2001.
ii. The alternative argument was that even if the Act were to apply, the limitation period for execution of a foreign decree would be determined as per Article 136 of the Act.
iii. Section 44A of the Code clearly provides that a decree passed in a reciprocating country should be treated as an Indian Decree and, therefore, the same must be enforced within 12 years from the date of passing of the decree as provided by Article 136 of the Act.
C. From the above, it can clearly be seen that not only both the courts below but even the parties were clearly of the view that if the Act was to apply, limitation for execution of foreign decree would be 12 years under Article 136. In such case, the only disagreement was with respect to the starting point of limitation, which as per the appellant was the day when the execution application was filed in India but as per the respondent, the starting point of limitation for execution of a foreign decree was the date when the foreign decree was passed. SC finally dismissed the appeal and held that the Application for execution was barred by limitation, albeit, for different reason.
Issues that arose for consideration before the Apex Court:
i. Does Section 44A merely provide for the manner of execution of foreign decrees or does it also indicate the period of limitation for filing execution proceedings for the same?
ii. What is the period of limitation for executing a decree passed by a foreign court (from a reciprocating country) in India?
iii. From which date the period of limitation will run in relation to a foreign decree (passed in a reciprocating country) sought to be executed in India?
Findings of the Apex Court:
A. On issue no.1:
i. At the outset, the SC emphasized the change in the legal position after Section 44A was inserted in the Code in the year 1937. Prior to Section 44A, a decree passed by any court in a foreign country could not be executed in India and only a suit could be filed on the basis of the judgment passed by a foreign court. Section 44A brought about a change in law in respect of reciprocating countries, which agreed to respect the judgments and decrees passed in each other's courts.
ii. Expressing disagreement with the first contention of the appellant that no limitation is applicable, SC held that the present proceedings being execution proceedings are not at par with writ proceedings. The word 'application' used in Section 3 of the Act is wide enough to include an application filed for execution of a decree, including a foreign decree. Therefore, the principles of delay and laches, which may be applicable to writ proceedings, cannot be applied to civil proceedings and are not at all attracted in proceedings filed under the Code, which must be filed within the prescribed period of limitation.
iii. Turning down the second contention of the appellant the SC held that there is no concept of cause of action in so far as an execution petition is concerned. Cause of action is a concept relating to civil suits and not to execution petitions. In case of a decree, it becomes enforceable the day it is passed. Therefore, filing of an application under Section 44A will not create a fresh period for enforcing the decree. The clock of limitation cannot be kept in abeyance at the choice of the decree holder. SC disapproved the view taken by a Full Bench of the Madras High Court in the case of Sheik Ali vs. Sheik Mohamed that limitation will start running on filing of an application under Section 44A.
iv. SC held that Section 44A is only an enabling provision, which enables the District Court to execute the decree as if the decree had been passed by an Indian Court and it does not deal with the period of limitation.
The Apex Court accordingly answered issue no.1 by holding that Section 44A only enables the District Court to execute a foreign decree and further provides that the District Court shall follow the same procedure as it follows while executing an Indian decree, but it does not lay down or indicate the period of limitation for filing such an execution petition.
B. On issue no. 2:
i. Conscious of the effect of economic globalization leading to widespread international and cross-border transactions, SC delved upon a question that if the decree is to be executed in another jurisdiction, which law should apply? Whether the law of limitation as applicable in the cause country or forum country would apply? The expressions 'cause country' and 'forum country' would mean the country in which the decree was passed (i.e. England in this case) and the country in which the decree is sought to be executed (i.e. India in this case), respectively.
ii. If Article 136 of the Act is to apply then the period of limitation for filing application seeking execution of any foreign decree would be 12 years regardless of the limitation which may be prevalent in the country where the decree was passed i.e. cause country, which is 6 years in terms of Section 24 of the Limitation Act, 1980 of the United Kingdom.
iv. In recent years, almost all the common law countries have either brought a new legislation or by judicial decisions have now taken the view that the law of limitation cannot be termed as a purely procedural law.
v. The view worldwide appears to be that the limitation law of the cause country should be applied even in the forum country. As India becomes a global player in the international business arena, it cannot be one of the few countries where the law of limitation is considered entirely procedural. In cases where the remedy 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 a decree. These are substantive rights and cannot be termed to be procedural.
The Apex Court accordingly answered issue no.2 by holding that the limitation period for executing a decree passed by a foreign court (from reciprocating country) in India will be the limitation prescribed in the reciprocating foreign country i.e. the cause country. SC held that the Act is a substantive law and not procedural law.
C. On issue no. 3:
The Apex Court accordingly answered issue no.3 by holding that the period of limitation would start running from the date the decree was passed by the foreign court of in a reciprocating country i.e. the cause 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 he can file a petition for execution in India for recovery of the balance amount within a period of three years from the finalization of the execution proceedings in the cause country.
Going by the rationale, this judgment essentially sets out two scenarios as discussed above, for the operation of limitation qua application for execution of a foreign decree of a reciprocating country, in India. Though the law laid down by the SC in this judgement is succinctly clearly, and is the law of the land going forward, following aspects need to be considered and pondered over:
I Whether the judgment aims at filling up the gap in the statute i.e. The Limitation Act, 1963
II. In the absence of a specific mention as to whether this judgment would apply retrospectively or prospectively, what would be its effect on the maintainability of such execution petitions, seeking execution of a foreign decree, which though have been filed beyond the limitation period applicable in the cause country but within 12 years in terms of Article 136 of the Act in the forum country/India and are pending as on the date of this judgment?
II. Whether the ratio laid down in this judgment will have a bearing on the issue of limitation for filing application seeking enforcement of a Foreign Award?
Vikas Goel, Partner with almost 25 years of experience heads the dispute resolution practice at Singhania & Partners. He appears before Supreme Court of India, various appellate tribunals, and High Courts. He is a reputed name in corporate litigation, infrastructure arbitrations, contractual/ commercial disputes, recovery of debts and claims, and labour disputes. Vikas' practical business judgment contribute to delivery of cost-effective results to clients. Atal Smriti Memorial set up in the honour of former Prime Minister, Shri Atal Bihari Vajpayee felicitated Vikas in December 2019 for his exemplary contribution in the field of dispute resolution.
Yaman has risen the ranks after starting his career with Singhania & Partners. He has wide experience of handling varied litigation matters and he is specialising in construction disputes. He has an extensive experience in handling Domestic and International Arbitrations. He has closely worked on arbitrations involving disputes arising out of Highway Construction Agreements, Concession Agreements, and Consultancy Service Agreements.
 Dated 17.03.2020 Civil Appeal No. 2175 of 2020
 Section 44A of the Code -
 Section 136 of the Act-
 AIR 1967 Mad 45
 SC analysed the transition in the legal position as regards the classification of statute of limitation i.e. whether procedural or substantive. Referring to Dicey's observation in 'Conflict of Laws' 6th Edition the court observed that the earlier view was that the law of limitation being a procedural law, the law of the forum country would govern the field. Indian courts have normally taken the view that the law of limitation is a procedural law. However, there is a change in view. The present view is entirely different and appears to be that law of limitation is not a procedural law especially when it leads to extinguishment of rights or remedies. This view is reflected in Dicey's 'Conflict of Laws' 14th Edition as well as in Cheshire & North's Private International Law 15th Edition.
 Article 137of the Act -
 MANU/DE/4897/2012; O.M.P. 61 of 2012 and O.M.P. 201 of 2001
 O.M.P. (EFA) (Comm.) 15/2016