SUPREME COURT OF INDIA
Bank of Baroda v. Kotak Mahindra Bank
Civil Appeal no. 2175 of 2020 | Date: 17.03.2020
FACTS
Kotak Mahindara Bank (“Respondent”) on the behalf of Aditya Steel Industries issued a letter of credit in favour of M/s. Granada Worldwide Investment Company, London (“GWIC”). Bank of Baroda (“Appellant”) was the confirming bank to the said letter of credit.
On 12.10.1992 to honour the letter of credit, the Vysya Bank (“VB”) issued instructions to the London branch of the Appellant. Thereby, the London branch of the Appellant discounted the letter of credit and on 13.10.1992 the payment was made to GWIC.
On 19.04.1993, the Appellant for the recovery of its dues filed a suit against VB in London. On 20.02.1995 the High Court of Justice, Queens Bench, Divisional Commercial Court of London (“London Court”) decreed the suit. The Court passed a decree in favour of the Appellant and against VB.
On 28.08.1995, VB placed an interbank deposit with the main branch of the Appellant bank on rollover basis with a request that the decree passed by the London Court be not executed. However, in 2003 VB, for recovery filed a petition before the Debt Recovery Tribunal (“DRT”).
The Appellant after 14 years i.e. on 05.08.2009 filed an execution petition, after the decree was passed by the London Court, under Section 44A read with Order 21 Rule 3 of the Code of Civil Procedure, 1908 (“CPC”).
The petition was challenged on the ground that such a petition was not filed in the limitation period. On 20.07.2013, Bangalore Session’s Court dismissed the execution petition as being time barred holding that Article 136 of the Limitation Act, 1963 (“the Act”) will be applicable and thus, the execution petition should have been filed within 12 years of the decree being passed by the London Court.
Thereby, the Appellant approached the High Court which upheld the decision of the Session’s Court. Hence, this appeal.
ISSUES BEFORE THE SUPREME COURT
1. Does Section 44A 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?
2. What is the period of limitation for executing a decree passed by a foreign court (from a reciprocating country) in India?
3. 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?
CONTENTIONS OF THE PARTIES
The Appellant premised its case on the ground that there is no such limitation period prescribed under the Act for the execution of a foreign decree passed in a reciprocating country.
The Appellant averted that the principles of delay as applicable to write proceedings will applicable. It attempted to establish that best efforts were made to settle the matter and thereby there was no delay in filing the petition.
Further, the Appellant submitted that the Act does not provide for a period of limitation for filing of an execution petition, thus the cause of action in such an event only arises when a petition was filed under Section 44A of the CPC. According to Section 44A, a decree passed by the Court of reciprocating country is treated as an Indian decree. Thus, the limitation period of 12 years as conferred under Article 136 of the Act applies from the date when the decree is treated to be an Indian decree.
The Appellant argued relying upon the judgment of the House of Lords East End Dwellings Co. Ltd. vs. Finsbury Borough Council [1952] AC 109, which has been approved by Income Tax Commissioner vs. S. Teja Singh (1959 AIR 352) argued that Section 44A (1) is a deeming provision and it should been should interpreted in its full meaning.
Whereas, the Respondent argued that instead of the Indian law, the limitation law of England would be applicable. As per the English law the limitation period for execution of a decree is 6 years. Therefore, no petition for execution could be filed after 20.02.2001 as the decree was passed on 20.02.1995.
Further, the Respondent contended that assuming, that the Indian law of limitation is applicable in the instant case, then also the same was supposed to be executed within 12 years as per Article 136 of the Act. Thus, the petition is barred under the Indian law as well.
DECISION AND FINDINGS
ISSUE I
The Court emphasised upon Section 44A of CPC and disagreed with the Appellant’s argument that no limitation is applicable. The Court adjudicated that exectution proceedings are not writ proceedings.
The Court stated that “Section 3 clearly sets out that subject to the provisions contained in Section 4 to Section 24 of the Act, every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed even if limitation has not been set up as a defence”. The Court threw the light upon the term “application” and stated that it is wide enough to include an application filed for execution of a decree (including the foreign decree).
The Court held that concept of cause of action is related to civil suits and not to execution petitions. The Court also held that “a decree is a determination already made by a court on the basis of a reasoned judgment. In case of a decree it becomes enforceable the day it is passed.” Thereby, the Court adjudicated that filing of an application under Section 44A will not create a fresh period for enforcing the decree.
The Court also relied upon the case of Lakhpat Rai Sharma vs. Atma Singh, AIR (58) 1971 P&H 476 wherein it was held that the foreign decree has to be executed in India as if it had been passed by an Indian court and the legal fiction must be extended to its logical end. The Court held that if no measure is taken the decree holder to execute the decree in India before the prescribed limitation, then the execution petition shall be barred by limitation.
The Court also observed that Section 44A doesn’t deal with the limitation period but merely an enabling provision which allows the District Court to execute any decree as they are passed in India.
ISSUE II
The Court observed that earlier the limitation was treated as a procedural law under common law. However, civil jurisdiction, the law of limitation has never been treated as a procedural law but as a substantive law. In recent years, most of the common law countries have also brought changes and came up with the view that the law of limitation cannot be treated as a purely procedural law, including India.
The Court held that “if the law of a forum country is silent with regard to the limitation prescribed for execution of a foreign decree then the limitation of the cause country would apply”.
Thus, the limitation period for executing a decree passed by a reciprocating country will be as per the limitation law of the reciprocating country/cause country.
ISSUE III
The court observed that Article 136 of the Act only deals with the decrees passed by the Indian Courts. Since the Article 136 doesn’t include the term foreign decrees’, it shows the intention that the law makers intended to keep it confined to the decrees of the Indian Courts. The Court noted that Article 136 clearly provided that the decree should be of a civil court which is not the same in a foreign jurisdiction.
The Court held that there are two-fold requirements and no foreign decree can be executed unless both the requirements are met, which are as follows:
1. A certified copy of the decree and
2. A certificate from the court in the cause country stating the extent, if any, to which the decree has been satisfied or adjusted.
The Court further stated that however that does not mean that nothing else has to be filed. The court emphasised that the executing court cannot execute this decree and certificate unless the decree holder also provides various details of the judgment debtor that is, his address, etc. in India and the details of the property of the judgment debtor. These particulars will have to be provided by a written application filed in terms of clause (2) of Rule 11 of Order 21 of the CPC.
The Court adjudicated that the foreign decree will not be covered under any other provision of the Act. Thus, it would be covered under Article 137 of the Act and the applicable limitation would be 3 years.
Finally the Court with regards to the third issue concluded by stating that
“the period of limitation would start running from the date the decree was passed in the foreign court of a reciprocating country. However, if the decree holder first takes stepsinaid to execute the decree in the cause country, and the decree is not fully satisfied, then he can then file a petition for execution in India within a period of 3 years from the finalisation of the execution proceedings in the cause country”.
AMLEGALS REMARKS
The Court settled the law of limitation applicable to execution of a foreign decree from reciprocating country in India. The decision is going to be helpful for all the decree-holders in the reciprocating country. The decision can also be expected to have significant impact on the enforcement of arbitral awards in India.
The Court emphasised that if the law of a forum country is silent with regard to the limitation prescribed for execution of a foreign decree then the limitation of the cause country would apply. Whilst, the Apex Court has rendered a clear rule, an explicit legislative intervention would further resolve the issue.
Nonetheless, conclusively it is recommended to the foreign decree holders to execute their decree within 3 years from the date of foreign decree or any shorter limitation period applicable in the cause country.
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