Supreme Court decides upon the limitation period applicable for execution of a foreign decree in India under Section 44A of the Civil Procedure Code

International trade is increasing day by day both in terms of value as well as volume for the reasons that are not far to see., on a global scale, are some of the prime factors that are aiding economies to become more and more open to world trade. Notably, expansion of international business commercial transactions will also lead to increase in international commercial disputes which surely will entail a question of great importance as to how to get the fruits of the decree realized in a situation when the decree has been passed by the Courts of a foreign country (cause country) sought to be executed in another country (forum country). Therefore, an important question that needs to be answered with respect to such cross-border execution of decree(s) is that the Limitation Act of which country would apply in execution proceedings specifically when the two Countries are reciprocating countries? Will the Limitation Act of the country that has rendered the judgment and decree (cause country) will be applicable or will the Limitation Act of the country, in which the execution petition has been filed (forum country), will be applicable? This precise question came up for consideration before the Supreme Court in the case of Bank of Baroda v. Kotak Mahindra Bank Limited , SLP(Civil) No. 8123 of 2015, which has been answered by the Supreme Court vide its judgment dated March 17, 2020. The Issue The issue in the matter pertained to filing of execution petition by the decree holder under the provisions of Civil Procedure Code, 1908 (“CPC”), as applicable in India, but after a period of 14 years from the date of the judgment and decree passed by the foreign Court. To make it more precise, the Supreme Court, in the opening of the judgment itself, framed the parent question to be answered, in the following terms- “What is the limitation for filing an application for execution of a foreign decree of a Reciprocating Country in India?” Besides the parent question, three more aiding questions were framed in the course of the judgment by the Supreme Court, which arose out of the peculiar facts of the case but bore importance of wide amplitude owing to the extensive applicability and far reaching implications on the matter specie, so as to decide the controversy for once and for all and to set at rest any and/or all ambiguities in the matters connected with or incidental to the issue of limitation for execution petitions filed in India seeking execution of foreign decrees. Three questions which have been eloquently answered by the Supreme Court are Does Section 44A of CPC 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? What is the period of limitation for executing a decree passed by a foreign court (from a reciprocating country) in India? 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? After analyzing all the relevant and material aspects to the questions of law involved vis-à-vis historical background, current school of thought across international spectrum, applicable provisions of law, it has been held by the Supreme Court that- Section 44A of CPC only enables the District Court to execute the decree and 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. Limitation period for executing a decree passed by a foreign court in India will be the limitation prescribed in that foreign country and will be subject to the decree being executable in terms of Section 13 of CPC which enlists exceptions under which foreign judgment is not considered conclusive. Period of limitation would start running from the date the decree was passed in the foreign Court. However, if the decree holder first takes steps in aid to execute the decree in the foreign 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 foreign country. Facts Vysya Bank, the predecessor of the respondent bank i.e. Kotak Mahindra Bank Limited , in the Civil Appeal before Supreme Court issued a Letter of Credit (“LOC”) for US$ 1,794,258 (US Dollars One Million Seven Hundred Ninety Four Thousand Two Hundred and Fifty Eight) on behalf of its customer Aditya Steel Industries Limited in favour of Granada Worldwide Investment Company, London. The Appellant bank i.e. Bank of Baroda in the Civil Appeal filed before Supreme Court was the confirming bank. Acting on the instructions of Vysya Bank, London branch of Bank of Baroda discounted LOC for a sum of US$ 1,742,376.41 (US Dollar One Million Seven Hundred Forty Two Thousand Three Hundred Seventy Six and Forty One cents) and made payment to Granada Worldwide Investment Company on October 13, 1992. Bank of Baroda filed a suit against Vysya Bank for recovery of its dues on April 19, 1993 in London which was decreed by High Court of Justice, Queens Bench, Divisional Commercial Court of London (“London Court”) on February 20, 1995 and a decree for US$ 1,267,909.26 (US Dollars One Million Two Hundred Sixty Seven Thousand Nine Hundred Nine and Twenty Six cents) along-with interest thereon was passed in favour of Bank of Baroda and against Vysya Bank. The decree became final for want of challenge. On August 28, 1995, Vysya Bank placed an interbank deposit of US$ 1,400,000 (US Dollars One million Four Hundred Thousand) with Bank of Baroda on rollover basis with a request that the decree passed by the London Court not to be executed. In 2003, ING Vysya Bank, filed a petition before the Debt Recovery Tribunal (DRT) for recovery of US$ 1,400,000 (US Dollars One Million Four Hundred Thousand). The proceedings of the same, are still pending. On August 05, 2009, Bank of Baroda filed an execution petition, almost 14 years after the decree was passed by London Court for execution of the same in terms of Section 44A read with Order XXI Rule 3 of CPC for recovery of a sum of Rs. 164,388,187.86(Rupees One hundred sixty-four million three hundred eighty eight000 one hundred eighty seven and eighty six paise). The execution petition was contested mainly on the ground that the same had not been filed within the period of limitation. On July 20, 2013, the Court of the Additional City Civil and Session Judge, Bangalore (“Trial Court”) dismissed the execution petition as time barred holding that Article 136 of the Limitation Act, 1963 applies and the execution petition should have been filed within 12 years of the decree being passed by London Court. Aggrieved by the aforesaid order passed by the Trial Court, Bank of Baroda approached the Karnataka High Court, which vide its judgment dated November 13, 2014 upheld the view of the Trial Court. Consequently, Bank of Baroda was constrained to prefer the instant Special Leave Petition (Civil) bearing No.8123 of 2015 before the Supreme Court. Submissions made by the Parties before the Supreme Court Submission by Appellant - Bank of Baroda The Limitation Act of India does not prescribe any period of limitation for execution of a foreign decree. Thus, principles of delay and laches applicable to writ proceedings may apply and since matter was pursued for settlement, there is no delay in filing of the execution petition in India. Since no limitation is provided under the Limitation Act of India, cause of action to file an execution petition arises only when a petition is filed under Section 44A of the CPC, which provides that decree passed by a Court in a reciprocating country should be treated as an Indian decree and therefore, the limitation of 12 years provided under Article 136 of Limitation Act of India applies only from that date because that is the date when cause of action arises and the decree is treated to be an Indian decree. Submission by Respondent – Kotak Mahindra Bank Limited Law of Limitation of England would apply in which limitation period is of 6 years for execution of a decree. Decree having been passed on February 20, 1995, no petition for execution could be filed after February 20, 2001. In the alternative, even if the Indian law on limitation was to apply, the limitation period for execution of a foreign decree would be determined as per Article 136 of the Indian Limitation Act. Section 44A of CPC provides that decree passed in a reciprocating country should be treated as an Indian decree. Thus, same must be enforced within 12 years from the date of passing of the decree as provided by Article 136 of the Indian Limitation Act. Analysis 1. Section 44A CPC (execution of decrees passed by countries in reciprocating territory) applies only to money decrees and not to other decrees. Section 44A was inserted in CPC in 1937. Prior to that, 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 change in law in respect of reciprocating countries which agreed to respect the judgments and decrees passed in each other’s Courts. As per Section 44A CPC, a decree passed by any superior Court of a reciprocating territory can be executed in India as if it had been passed by the District Court before whom it is filed, for which a certified copy of the decree and a certificate, from the Court which passed the decree, stating extent to which decree has been satisfied is a must. Also, District Court can refuse to execute any such decree if it falls within exceptions (a) to (f) of Section 13 of CPC. Argument of Bank of Baroda that no limitation is applicable and Indian Law of Limitation will not apply was rejected by Supreme Court holding that Limitation Act of India is a complete code in itself and the word ‘application’ used in the Act is wide enough to include an application filed for execution of a decree, even a foreign decree. Next argument of Bank of Baroda that limitation will start running only after the petition under Section 44A of CPC is filed; that cause of action for executing the decree in India arises only after the application under Section 44A is filed was also rejected by the Supreme Court holding that there is no concept of cause of action for execution petition which is relating to civil suits. Decree passed in the suit is a determination already made by a court on the basis of a reasoned judgment and decree becomes enforceable the day it is passed. Section 44A only enables the District Court to execute the decree and further provides that the District Court shall follow the same procedure as it follows while executing an Indian decree. Section 44A only provides the procedure to be followed in execution but does not lay down or indicate the period of limitation for filing such an execution petition. 2. It bears importance to note that the limitation to execute a decree in United Kingdom i.e. Cause Country-country which issued the decree, is 6 years. However, in India i.e. Forum Country- country in which Decree is sought to be executed, limitation to execute a decree is 12 years. The question which arises for determination is that if the decree is to be executed in another jurisdiction, i.e., the forum country, which law should apply? Whether the law of limitation as applicable in the cause country or the forum country would apply? 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, Hon’ble Supreme Court, in the judgment, referred to Dicey’s Conflict of Laws and Cheshire and North’s Private International Law observed that in countries following civil jurisdiction, the law of limitation has never been treated as a procedural law but as a substantive law. 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 treated as a purely procedural law for which reference to the law in the United Kingdom and the United States of America can be taken. After discussing the Legislative provision of various Common Law countries on the present issue the Hon’ble Supreme Court observed the following “33. The view worldwide appears to be that the limitation law of the cause country should be applied even in the forum country. Furthermore, we are of the view that in those cases where the remedy stands extinguished in the cause country it virtually extinguishes the right of the decreeholder to execute the decree and creates a corresponding right in the judgment debtor to challenge the execution of the decree. These are substantive rights and cannot be termed to be procedural. 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.” When 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 the decree which is a substantive right and cannot be termed to be procedural. India 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. 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, limitation period for executing a decree passed by a foreign court in India will be the limitation prescribed in the reciprocating foreign country. 3. The Supreme Court also observed that Article 136 of the Indian Limitation Act only deals with decrees passed by Indian courts since wherever the need was felt to deal with something outside India, the Limitation Act specifically dealt with it. Reference for the same can be had to Article 39 of the Indian Limitation Act which deals with dishonored foreign bills and Article 101 of the Indian Limitation Act which deals with suits filed upon a judgment including a foreign judgment and specifically mentions “including a foreign judgment”. Similarly, when dealing with applications for execution of decrees the law makers could have easily said ‘including foreign decrees’ but have not said. Furthermore, Article 136 clearly states that the decree or order should be of a civil court. A civil Court, as defined in India, MAY NOT BE same as in a foreign jurisdiction. The new Limitation Act was enacted in 1963 and presumably law makers were aware of the provisions of Section 44A of the CPC as 44A was inserted in CPC in 1937. When they kept silent on this aspect, the only inference that can be drawn is that Article 136 only deals with decrees passed by the Civil Courts of India. Decision The Supreme Court held that Limitation period for executing a foreign decree (of a reciprocating country) in India will be the limitation prescribed in the foreign country. Limitation period would start running from the date the decree was passed in the foreign country i.e. the cause country and the period of limitation prescribed in the forum country (India in this case) would not apply. In case the decree holder does not take any steps to execute the decree in the foreign country within the period of limitation prescribed in that country, it cannot come to India and plead a new cause of action or plead that the Limitation Act of India should apply. If the decree holder first takes steps in aid to execute the decree in the foreign country i.e. the cause country, and the decree is not fully satisfied, then he can then file a petition for execution in forum country i.e. India within a period of 3 years from the finalisation of execution proceedings in the foreign country, as per Article 137 of the Indian Limitation Act. Decree holder must approach the Indian Court along-with the certified copy of the decree and the requisite certificate within this period of 3 years. Right to apply for execution under Section 44A of CPC in India will accrue only after execution proceedings in the foreign country are finalised. Further, the Supreme Court also held that Limitation Act of India is a complete code in itself and the word ‘application’ used in the Act is wide enough to include an application filed for execution of a decree, even a foreign decree. Section 44A CPC, says that certified copy of the decree and also a certificate from the Court in the cause country stating the extent, if any, to which the decree has been satisfied or adjusted are to be filed which are twin requirements and no foreign decree can be executed unless both the requirements are met. Party filing a petition for execution of a foreign decree must also necessarily file a written application in terms of Order XXI Rule 11 clause (2) of CPC. There is no concept of cause of action for execution petition which is relating to civil suits. Decree passed in the suit is a determination already made by a Court on the basis of a reasoned judgment and decree becomes enforceable the day it is passed. Section 44A of CPC only provides the procedure to be followed in case of execution but does not lay down or indicate the period of limitation for filing such an execution petition. Section 44A only enables the District Court to execute the decree and further provides that the District Court shall follow the same procedure as it follows while executing an Indian decree. When 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 the decree which is a substantive right and cannot be termed to be procedural. Article 136 of the Indian Limitation Act only deals with decrees passed by Indian Courts. This updated has been contributed by Dattatray Vyas (Managing Associate) and Akshay Singh Sengar (Associate).