Bank of Baroda v. Kotak Mahindra Bank Ltd.  – Civil Appeal No. 2175 of 2020: Supreme Court of India (decided on 17 March 2020)

Relevant Facts:

Respondent bank had issued a LC on behalf of its customer in favour of a company in London. Appellant bank was the confirming bank to the LC. Respondent bank instructed its London branch to honour the LC and, accordingly, the payment made to London based company. Appellant sued Respondent in London to recover the dues.

20.02.1995: The Suit was decreed by High Court of Justice, Queens Bench for an amount of USD 1,267,909.26 along with interest in Appellant’s favour. This was not challenged.

05.08.2009: After 14 years, Appellant filed for execution in India (City Civil Court, Bangalore) under Section 44A read with Order 21 Rule 3 of the CPC for recovery of Rs 16,43,88,187.86. This petition was contested mainly on the ground on limitation.

20.07.2013: The executing Court in Bangalore dismissed the petition as time barred holding that Article 136 of the Limitation Act 1963 applies and hence it should have been filed within 12 years of the decree.

13.11.2014: The High Court upheld executing court finding in Appeal.

2015: SLP was preferred in the Supreme Court.

Issue:

What is the limitation for filing an application for execution of a foreign decree of a reciprocating country in India?

Judgement:

The Court framed the following sub-issues basis the arguments:

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) 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?

Sub-Issue 1:

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 period of limitation. It also provides that Section 47 of CPC applies. Section 44A has noting to do with limitation. Supreme Court set aside the view taken by Madras High Court (Sheik Ali v. Sheik Mohamed, AIR 1967 Mad 45). Supreme Court rejected the contention of Appellant that the date of filing of certified copy of decree will considered the date of starting limitation period.

Sub-Issue 2:

The limitation period for executing a decree in England is 6 years. If that has to apply, the execution petition should have been filed by 20.02.2001. If the limitation of 12 years has to apply in terms of Article 136, the present petition will still be time barred as it was filed only in 2009.   

The earlier view was that the law of limitation being a procedural law, the law of the ‘forum country’ (India) would govern the field (See Uthamram v. K. M. Abdul Kasim, AIR 1964 Mad 221 (DB)).

But according to Dicey’s, the law of limitation is not procedural, especially when it leads to extinguishment of rights or remedies. Court also considered the views in Cheshire & North’s Private International Law and Foreign Limitation Periods Act, 1984 as applicable in the UK, Uniform Conflict of Laws Limitation Act, 1982 (USA) and concluded that view worldwide appears to be that the limitation law of the cause country should be applied even in the forum country.

The Court observed that in those cases where the remedy stands extinguished in the cause country, it virtually extinguishes the right of the decree-holder to execute the decree and create a corresponding right in the judgement debtor to challenge the execution. These are substantive rights and cannot be treated entirely procedural.

The Court concluded that limitation period for executing foreign court decree (from reciprocating territory) in India will be the limitation prescribed in the reciprocating foreign country.

Sub-Issue 3:

The Court held that Article 136 applies deals with decrees passed by Indian Courts. Whenever the need was felt to deal with something outside India, the Limitation Act specifically deal with that situation, for example Articles 39, 101. That being the legislative intent, the Act won’t apply to execution of foreign decree in India. Further, Article 136 states the order or decree should of civil court, whereas the definition of civil court may not be the same as in foreign jurisdiction.

The application for execution of foreign decree will not be covered under any article of the Limitation Act and would thus be covered under Article 137 and therefore applicable limitation wold be 3 years.

□ How to calculate limitation?

Situation1: Where the decree holder does not take steps for execution of the decree during the period of limitation prescribed in the cause country for execution of decrees in that country.

●  It has lost right to execute in the cause country. Limitation would start running from the date the decree was passed in the cause country and the period of limitation prescribed in the forum country would not apply. In case the decree holder does not take steps to execute in the cause country, it cannot come to the forum country and plead a new cause of action or plead that the limitation of the forum country should apply.

Situation 2: When a decree holder takes steps in aid to execute the decree in the cause country.

●  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 file a petition for execution in India within 3 years (Article 137) of the finalization of the execution proceedings in the cause country.

□ Points to be kept in mind while executing foreign order in India:

● Its essential to file a certified copy of the decree and also a certificate from the court in the cause country, if any, to which the decree has been satisfied or adjusted. These are twin essentials under Section 44A, CPC.

● The application must be accompanied with various details of the judgement debtor (address, details of property, etc.) by a written application under Order 21, Rule 11 (2) CPC.

Comments:

The judgement is progressive and deals with different situations that may arise in the course of execution of foreign decree in India from reciprocating territories. However, the implication can very well be compared with enforcing ‘foreign award’ in India which is considered as ‘deemed decree’, but the limitation of 12 years is applied under Article 136. Though the judgement does not discuss the aspect of ‘foreign award’ at all, following this ratio, a ‘foreign award’ is being given differential treatment compared to ‘foreign decree’, both from respective reciprocating territories.

The judgement widens the chance of scrutiny (if a challenge is being preferred by the GoI) of the judgement recently passed by the Delhi High Court in Cairn India Ltd & Ors vs Government of India, O.M.P.(EFA) (Comm.) No. 15 of 2016 wherein it was held that Article 136 of the Limitation Act (12 years) would apply to an enforcement of a foreign award in India.