India: Shorter Limitation Period For Execution Of Foreign Decrees Of A Reciprocating Territory In India

"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."

Introduction

The above observation was made by the Hon'ble Supreme Court in a recent judgment passed in Bank of Baroda vs Kotak Mahindra Bank Ltd.¹ decided on 17 March 2020. Supreme Court viewed the law of limitation as having a positive and negative facet.

Negative, since it would extinguish the right of a foreign Decree Holder to execute a foreign decree passed in a reciprocating territory. Positive, since it would create a corresponding right in the Judgment Debtor to challenge the execution of the decree.

Not infrequently, have we witnessed debates on whether the statue of limitation operates in the realm of procedure. The Supreme Court in its judgment clarified that proceedings filed under the Code of Civil Procedure, 1908 ('Code'), which deals with execution of foreign decrees of a reciprocating territory, must be filed within the prescribed period of limitation. Thereby, ruling out the applicability of principles of delays and laches in such cases.

The judgment serves as an integral guide for foreign Decree Holders to ensure there is no Rip Van Winkleism for enforcing foreign decrees passed in their favour, in India.

Background

The present proceedings involved execution of a foreign decree passed by the High Court of Justice, Queens Bench, Divisional Commercial Court of London. The Decree Holder sought to execute the decree under Section 44A of the CPC, almost 14 years after it was passed by the Commercial Court. The Respondent resisted the execution primarily on the ground that the same was not filed within the period of limitation.

Issues before the Supreme Court

1. Section 44A² of the Code, 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 will the period of limitation run in relation to a foreign decree (passed in a reciprocating country) sought to be executed in India?

Determination and Analysis

Issue No.1

Prior to insertion of Section 44A of the CPC, 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 the foreign court. Section 44A marked a change in law and greater comity in respect of reciprocating countries.

The Court observed that the concept of cause of action is unknown to execution petitions. Therefore, Section 44A, does not create a fresh period of limitation for enforcing the decree. It becomes enforceable the day it is passed.

The above derives its genesis from an example expounded by the Court wherein it discussed the possibility of a Decree Holder taking advantage of its own wrong as it could seek a decree and keep silent for several years. This is because, the country where decree is passed and where it is sought to be executed may have different periods of limitation. If Section 44A is interpreted to mean that it creates a fresh period of limitation, the Decree Holder may simply keep silent for years and suddenly decide to petition a Court in India by contending that the clock of limitation was kept it abeyance and will not commence.

While concluding the first issue, the Court observed that Section 44A does not lay down or indicate the period of limitation for filing an execution petition seeking execution of a foreign decree of a reciprocating territory. Section 44A is 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.

Issue No.2

For many years, there has been a divided house on issue of limitation period for executing a foreign decree of a reciprocating territory in India. One view has been that, the Limitation Act, 1963 ('Act'), does not prescribe any limitation period for such cases. Therefore, the principles of delay and laches³ will apply. The other view, which appears to have been largely followed is that, the limitation period for execution of a foreign decree would be determined as per Article 136⁴ of the Act. The rationale was that, Section 44A of the Code provides that a decree passed in a reciprocating country should be treated as an Indian decree. Therefore, the same must be enforced within 12 years from the date of passing of the decree.

To address the above and arrive at a determination on Issue No.2, the Court inter-alia examined the issue of conflict of laws as well as whether law of a forum country⁵ would govern the field vis-à-vis law of limitation. After intrinsically examining limitation laws of United Kingdom and United States of America, the Court noted that almost all the common law countries have accepted that the law of limitation cannot be treated as a purely procedural law. It was further observed that the limitation law of the cause country⁶ should be applied even in the forum country.

The Court determined Issue No.2 by holding that the limitation period for executing a decree passed by a foreign court of a reciprocating country, in India, will be the limitation prescribed in the reciprocating foreign country.

Issue No.3

With Article 136 of the Act inapplicable, the date from which limitation period will begin to run attains significance. The Appellant's contention that the limitation period will run from the date when a petition under Section 44A of the Code is filed, was rejected by the Court.

In these circumstances, the Court proceeded to adjudicate Issue No.3 above. Firstly, the Court ruled out the applicability of Article 136 of the Act to petitions seeking execution of foreign decrees of reciprocating territories. The Court observed that the said Article's applicability is restricted to decrees passed by Indian Courts.

This brought the Court to Article 137⁷ of the Act. The Court recognized the incumbent need to provide various details of the judgment debtor including details of their property, which would help the executing court in executing the decree. Accordingly, the requirement for filing an application under Order XXI Rule 11(2)⁸ of the Code was stressed upon and made a necessity. The Court applied the limitation period of 3 years under Article 137 of the Act for filing such an application for executing a foreign decree.

Thereafter, in arriving at a decision on the date from which the limitation begins, the Court envisaged the following two scenarios:-

Where the Decree Holder does not take steps for executing its decree in the cause country. Consequently, the Decree Holder loses its rights to execute the decree and the larger limitation period in the forum country will not aid the Decree Holder. The Decree Holder must abide by the law of limitation of the cause country since the forum countries may have larger limitation periods; and

Where the Decree Holder takes steps in aid to execute the decree in the cause country. Subsequently, only a part of the decree is executed. In such a case, the right to apply under Section 44A will accrue only when the execution proceedings in the cause country are finalized. Thereafter, an application may be filed within 3 years for executing the remaining part of the decree.

Finally, the Court answered Issue No.3 observing that the period of limitation would start running from the date the decree was passed in the foreign court of a reciprocating country. While carving out a distinction, the Court further held that, 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 it 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.

In conspectus, the answer to Issue No.3 was bifurcated into the two scenarios in order to clarify that the Decree Holder cannot take another bite at the cherry in the first scenario. To clarify, the authors state that once a Decree Holder has taken steps in aid to execute a decree, the limitation period of the cause country is seized and therefore, a fresh period of 3 years is granted for seeking execution of the foreign decree in India. Whereas, a Decree Holder cannot remain silent after seeking a decree, miss the deadline for filing the execution in the cause country and then seeking to benefit from the larger limitation period of the forum country. Law of limitation operating beyond the realm of procedure is a significant factor in the Supreme Court's judgment.

Conclusion

The judgment provides much needed clarity on the limitation period for executing a foreign decree passed in a reciprocating territory. Having said that, the judgment also clarifies certain procedural aspects which should be borne in mind while filing execution petitions seeking execution of foreign decrees of reciprocating territories.

While answering the questions of law, the Supreme Court juxtaposed concepts of ease of doing business in India with principles of comity. The Court also harmonized the conflict of laws in arriving at a purposive interpretation on the issue of limitation.

Foreign stakeholders in whose favour decrees have been passed in reciprocating territories, the judgment echoes a word of caution by highlighting that the defense of limitation is a party's substantive right and once the right to execute the decree is barred by limitation, the laws of a forum country will not aid the Decree Holder since it is not merely a matter of procedure.

Footnotes

[1] Civil Appeal No.2175 Of 2020

[2] 44A. Execution of decrees passed by Courts in reciprocating territory–

[3] The dictionary meaning of "laches" is negligence or undue delay specially such as to disentitle remedy.

[4] For the execution of any decree - Twelve years
(other than a decree granting a mandatory injunction) or order of any civil court

[5] Country where execution of decree is sought

[6] Country in which decree was issued.

[7] Any other application for which no period of limitation is provided elsewhere in this division - Three years - When the right to apply accrues.

[8] (2) Written application – Save as otherwise provided by sub ­rule (1), every application for the execution of a decree shall be in writing, signed and verified by the applicant or by some other person proved to the satisfaction of the Court to be acquainted with the facts of the case, and shall contain in a tabular form the following particulars, namely :­

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.