EXECUTION
OF FOREIGN DECREE/ AWARD IN INDIA: SUPREME COURT SETTLES THE ISSUE OF
LIMITATION PERIOD
ANIL K KHAWARE
ADVOCATE
The globalization acted as a
prelude to liberalization and its interdependence
globally, since 1990s has become a pervasive need for Nations. The realization
had thus descended in the stakeholders and quest for access in global market
has driven the nations ever since to formulate laws to facilitate the trade. The
conducive environment was sought to be created and necessity was felt for a
drive to remove barrier in the way of administration of justice. The perceived laxity
in the judicial process acted as impediment in the way of opening of vistas of
commerce.
The perceived delays were two
pronged- one after tardy judicial process, obtaining finality of judgment was
an uphill task and secondly, even after judgment was rendered, the obstacle in
the way of executing the judgment was yet another dimension. The cross-border
transactions has increased multifold and thus need was felt to work upon dispute
resolution. As stated, obtaining a decree or award in itself was not enough,
its enforcement was equally important. One of the many concerns was to deal
with the issues of limitation period for seeking execution of foreign decrees/
judgments or awards.
What shall be the limitation
period for seeking execution of foreign awards in Indian courts had remained a
vexed questions over the years till the issue appears to have been conclusively
settled by hon’ble Supreme Court in a matter reported as Government of India v.
Vedanta Ltd. It may be worthwhile to refer to,
first, the Part II of the Arbitration & Conciliation Act 1996 is
significant. Section 47, 48 and 49 of the Act details the procedure of filing a
petition for execution of foreign award or ground of refusal. The foreign award is executable in terms of
section 49 of the Act and it entails that under section 48 the award shall be
deemed to be a decree of that court with a view to seek its enforcement. The
Limitation act 1963 is the Act which prescribes the limitation period for
filing any petition for seeking enforcement
It may be noted that there is no
categorical provision in the Limitation Act in this regard. There is no
provision in Part II of the Arbitration & Conciliation Act 1996 either, stipulating
a period of limitation for filing an application for enforcement of a foreign
award. Articles 136 and 137 of the Schedule to Limitation Act are relevant for
this purpose, if
any limitation, which shall be delved in little later.
When limitation period could be
reckoned?
Recently, in the case of Bank of Baroda v. Kotak
Mahindra Bank Ltd CIVIL APPEAL
NO.2175 OF 2020, the Supreme Court of India had the opportunity to examine the
limitation period, applicable to execution of foreign judgments in India
43. “It is held 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 steps in aid 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. Similarly, in paragraph 40 of the said judgment it is held that:
“ 40. The question that then arises is that from which date the limitation starts. We can envisage of 2 situations only. The first situation is one where the decree holder does not take any steps for execution of the decree during the period of limitation prescribed in the cause country for execution of decrees in that country. In such a case, he has lost his right to execute the decree in the country, where the cause of action arose. It would be a travesty of justice if the person having lost his rights to execute the decree in the cause country is permitted to execute the decree in a forum country. This would be against the principle which we have accepted, that the law of limitation is not merely a procedural law. This would mean that a person who has lost his/her right or remedy to execute the foreign decree in the court where the decree was passed could take benefit of the provisions of the Indian law for extending the period of limitation. In the facts of the present case, the limitation in India is 12 years for executing a money decree whereas in England it is 6 years. There may be countries where the limitation for executing such a decree may be more than 12 years. The right of the litigant in the latter situation would not come to an end at 12 years and it would abide by the law of limitation of the cause country which passed the decree. Hence, 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 any steps to execute the decree in the cause country within the period of limitation prescribed in the country of the cause, 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.”
Undoubtedly,
this judgment is a welcome change and clarifies the misassumptions on the law
of limitation for execution of foreign decrees. The Supreme Court has also gone
a step further, by acknowledging the elements of substantive law within the law
of limitation, thereby keeping up with international jurisprudence and previous
recommendations of the Law Commission of India.
However, the judgment lacks
clarity on situations where a decree holder seeks to file parallel or concurrent
proceedings in a foreign jurisdiction along with the execution proceedings in
the Cause Country. In this regard, the Supreme Court has held that the right to
file execution proceedings in India would accrue “only after finalization of
execution proceedings in the Cause Country”. However, the connotation of “finalization
of the execution proceedings” remains unanswered.
“CAUSE COUNTRY”
AND “FORUM COUNTRY”
The law of limitation has
undergone changes internationally. In fact, the limitation period has undergone
a transition from being purely procedural to substantive. Thus, the limitation
law of the country where the decree was rendered (“Cause Country”),
would be applied even in the country where the decree is sought to be executed
(“Forum Country”).
SECTION 44 A OF CODE
OF CIVIL PROCEDURE CODE vis a vis SECTION 48 OF ARBITRATION & CONCILIATION
ACT 1996
The Section 44 A of the Code of
Civil Procedure 1908 ( in short “CPC”) may be perused to further
appreciate the issue. The said provision is an enabling provision, though, and
does not lay down or indicate the limitation period for filing such an
execution petition. For instance, if a
decree holder does not take any step to execute the foreign decree in the Cause
Country, he may file an execution petition in India (Forum country), as per the
law of limitation of the “Cause Country”. Conversely, if a decree holder takes
steps-in-aid to execute a foreign decree in the Cause Country, and the
decree is not fully satisfied, he may file an execution petition in India (Forum
country) within 3 years from the ‘finalization’ of the execution proceedings in
such Cause Country.
FACTUAL PERSPECTIVE: ANLAYZED
For instance a case in point is a
judgment (“Foreign Judgment”) rendered by the High Court of Justice,
Queen’s Bench, Divisional Commercial Court of London (“Foreign Court”)
on 20 February 1995. The said judgment Bank of Baroda v. Kotak Mahindra
Bank Ltd (supra) was a money decree in favour of the Bank of Baroda against
Vysya Bank, predecessor of the Kotak Mahindra Bank. In this case, after a lapse
of almost 14 years, the Appellant, i.e., decree holder, filed for execution
proceedings in India, i.e., Forum Country on 5 August 2009 under Section 44 A of
the Code of Civil Procedure 1908 (“CPC”). Certain objections were raised
against the said execution proceedings as being time-barred. Aggrieved by the
decisions of the District court and High Court, the Appellant approached the
Supreme Court for a determination on the following issue:
“What is the limitation for
filing an application for execution of a foreign decree of a reciprocating
country in India?”
INSPIRATITHE TONTHE
SUPREME COURT’S FINDINGS
Section
44 A of the CPC is an enabling provision, which requires the District Court to
follow the same procedure as it follows while executing an Indian decree, and
does not deal with any limitation period. However, referring to Section
3 of the Limitation Act, the Supreme Court held that applications filed
for execution proceedings under Section 44 A of the CPC would also be subject
to limitation.
Law of limitation applicable to execution of foreign
decrees
The Supreme Court observed that
the law of limitation was previously considered ‘procedural’ in nature.
Accordingly, the law of limitation of the Forum Country was applicable to
execution of foreign decrees. However, the law of limitation has recently
undergone a transition from being ‘purely procedural’ to ‘substantive’ -
especially when it leads to extinguishment of rights or remedies, thus, the
scenario has undergone change.
In
this regard, the Supreme Court referred to international jurisprudence to
conclude that almost all the common law countries (including United Kingdom and
several states in the USA have incorporated this transition by way of
legislations or judicial pronouncements. The hon’ble Supreme Court observed
that the worldwide view appears to be that the limitation law of the Cause
Country should be applied even in the Forum Country. The Supreme Court
thereafter noted that as a global player, India could not be an exception in
holding that the law of limitation is purely ‘procedural’.
In any event, in cases where the
law of Forum Country is silent on the limitation period for execution of a
decree, the limitation period prescribed in the Cause Country would apply.
In this backdrop, the hon’ble Supreme
Court considered the following situations: -
Situation 1: When the decree holder does not take steps for execution of the
decree in the Cause Country
In case the decree holder does
not avail the remedy to execute the decree in the Cause Country within the
limitation period, it stands extinguished in the Cause Country. Consequently,
the right to execute in any other country is virtually extinguished. This would
also create a corresponding right in the judgment debtor to challenge the
execution of the decree. In such a scenario, the decree holder would be
prevented from coming the Forum Country, and pleading a new cause of action in
the Forum Country or that the limitation of the Forum Country would apply.
Hence, limitation would commence
from the date on which the decree was passed in the Cause Country and the
period of limitation prescribed in the Cause Country would apply.
Therefore,
in the given case, the limitation would commence from the date when the Foreign
Judgment was passed and the period of limitation prescribed in that country
(cause country) would be applicable, i.e., 6 years from 20 February 1995.
Situation 2: When a decree holder takes steps in-aid to execute the decree
in the “Cause Country”
In
the event that execution proceedings were initiated in the Cause Country but
the decree remained unsatisfied, the decree holder may consider initiating
execution proceedings in the Forum Country. In this regard, the hon’ble Supreme
Court observed that Article 136 of the Limitation Act is applicable to
decrees or orders of civil courts, and not courts of foreign jurisdictions.
Therefore, applications for executing a foreign decree, which are not covered
under any other provision of the Limitation Act, would be covered under the
residuary provisions of the Limitation Act, i.e., a limitation period of 3
years.
Thus, the period of limitation applicable to applications for execution
proceedings in India would be 3 years after the “finalization of the execution
proceedings in the Cause Country”. For reference, the period of limitation in
articles under the Limitation Act.
|
Description
of suit |
Period of
Limitation |
Time since
limitation period begins to run |
|
For the execution of any decree (other than a decree granting
a mandatory injunction) or order of any civil court. Article 136
of Limitation Act |
Twelve
years |
When the
decree or order becomes enforceable or where the decree or any subsequent
order directs any payment of money or the delivery of any property to be made
at a certain date or at recurring periods, when default in making the payment
or delivery in respect of which execution is sought, takes place. |
|
Any other application for which no period of
limitation is provided in this division Article 137 of
Limitation Act |
Three years |
When the
right to apply accrues |
Applicability of the present judgment
This judgment Bank of
Baroda v. Kotak Mahindra Bank Ltd (supra) s applicable to decrees from ‘reciprocating
territories’ only. The limitation period for judgments from non-reciprocating
territories would significantly vary, considering that the procedure for
execution of such judgments would also be different.
While
determining the limitation period for execution of foreign decrees, the Supreme
Court has diverted from the law of limitation governing enforcement of foreign
awards in India. Considering that foreign awards are executable as decrees of
Indian courts, courts have previously held that the limitation period
applicable to domestic decrees would also be applicable to such foreign awards,
i.e., 12 years as per Article 136 of the Limitation Act. However, in the light
of the interpretation of the Supreme Court that Article 136 of the Limitation
Act is applicable only to decrees of civil courts of India, the limitation
period applicable to enforcement of foreign awards may have to be re-examined. Unlike
China & Hong Kong which postulates limitation period prescribed for execution
of foreign awards, there has been no corresponding provision in India and now
by virtue of the judgment rendered by hon’ble Supreme Court, the issue of
limitation as regards foreign award stands settled. The voyage of judgments to
achieve this are narrated as under”
|
S.N |
Particulars |
Remark |
|
1. |
Noy
Vallesina Engineering SPA v. Jindal Drugs Ltd – Bombay High Court |
The two stages for execution of foreign award is
envisaged , the first stage for ascertaining determining the enforceability
of a foreign award under Section 48 of the Arbitration Act and is to be
governed by Article 137 of the Limitation Act that prescribes limitation
period for 3 years, Once enforceability of foreign award is determined, the
foreign award shall be construed as a decree and its execution shall be
governed by Article 136 of the Limitation Act which stipulates limitation
period of 12 years. |
|
2. |
Fuerest Day
Lawson v. Jindal Exports
Ltd 2001) 6 SCC 356 (Supreme Court) |
The term ‘enforcement’ is being
used in reference to the filing of an application for enforcement of the
foreign award under Sections 48 and 49 of the Arbitration & Conciliation
act 1996 Act before a competent Court in India. The Supreme court has
observed that firstly enforceability of foreign award is to be decided , and onward
proceeding may commence for taking effective steps for execution. Aspect of
enforceability is required to be tested by the concerned Court on the merits
when so approached, a preliminary question arises as to what is the ‘minimum’
time period, if any, within which a Court can be approached by an interested
party.. |
|
3. |
M/s Bharat
Salt Refineries Ltd. v. M/s Compania Naviera “SODNAC” & Anr –Madras High Court |
held that the limitation period of 12 years as
provided under Article 136 of the Limitation Act is applicable both for
enforcement as well as execution of the foreign award. The Fuerest judgment
was followed by Madras High Court.. |
|
4. |
Noy
Vallesina Engineering SPA v. Jindal Drugs Ltd CIVIL APPEAL NO. 8607 OF 2010
(Supreme Court) Decided on 26th
November 2020 |
It must be pointed out that
the law of the seat or place where the arbitration is held, is normally the
law to govern that arbitration. The territorial link between the place of
arbitration and the law governing that arbitration is well established in the
international instruments, namely, the New York Convention of 1958 and the
UNCITRAL Model Law of 1985. It is true that the terms “seat” and “place” are
often used interchangeably. In Redfern and Hunter on International
Arbitration [Blackaby, Partasides, Redfern and Hunter (Eds.), Redfern and
Hunter on International Arbitration (5th Edn., Oxford University Press,
Oxford/New York 2009)] (Para 3.51), the seat theory is defined thus:‘The
concept that an arbitration is governed by the law of the place in which it
is held, which is the “seat” (or “forum” or locus arbitri) of the
arbitration, is well established in both the theory and practice of
international arbitration. |
|
5. |
Imax
Corporation v. E-City Entertainment (Bombay High Court) COMMERCIAL ARBITRATION
PETITION NO.414 OF 2018- decided on 13th November 2019 |
Article 136 of Limitation Act would be the
applicable provision, for execution proceedings of foreign award providing a
limitation period of 12 years |
|
6. |
Bank of Baroda v. Kotak Mahindra Bank Ltd (Supreme Court) |
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 steps in aid 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. |
|
7. |
Government of India v. Vedanta Ltd. CIVIL APPEAL NO. 3185 OF
2020 (Supreme Court) |
A foreign award is not a
decree by itself, which is executable as such under Section 49 of the
Arbitration & Conciliation act 1996 ( as amended) Act. The enforcement of the foreign award
takes place only after the court is satisfied that the foreign award is
enforceable under Chapter 1 in Part II of the 1996 Act. After the stages of
Sections 47 and 48 are completed, the award becomes enforceable as a deemed
decree, as provided by Section 49. The phrase “that court” refers to the
Indian court which has adjudicated on the petition filed under Section 47,
and the application under Section 48. In contrast, the procedure for
enforcement of a foreign decree is not covered by the 1996 Act, but is
governed by the provisions of Section 44A read with Section 13 of the CPC. |
Thus, what clearly emerges from the above, more
particularly, Vedanta Judgment (supra) may be summarized as under::
(i)
Article 136 of the Limitation Act
shall not apply for seeking enforcement of a foreign award under Part II of the
Arbitration & Conciliation Act 1996 Act, since it is not a decree of a
civil court in India.
(ii)
The enforcement of a foreign
award under Part II of the Arbitration & Conciliation Act 1996 shall be covered
by Article 137 of the Limitation Act and that provides a period of limitation
of three(3) years and that is reckoned from
when the right to apply for it accrues.
(iii) Section 5 of the Limitation Act that permits
condonation of delay shall apply if the court is satisfied that there existed sufficient
cause for not preferring the application within the relevant period of
limitation. Thus, it is open to the holder of a foreign award under Part II of
the Arbitration & Conciliation Act 1996 to prefer an application for seeking
condonation of delay, if necessary.
(iv)
If the foreign award is otherwise
enforceable, the holder of a foreign award is entitled to seek its recognition
and enforcement of by way of a composite petition under Part II of the
Arbitration & Conciliation Act 1996. As per the trap of section 49 of the
Arbitration & Conciliation act 1996 the foreign award shall be deemed to be a
decree of that court and the court shall then execute the award by taking
recourse to Indian Law applicable to the execution of decrees.
CONCLUSION:
The Supreme Court in the Vedanta Judgment has reiterated the legal position that the courts
should be reluctant to review the foreign award on merits and should give a
narrow interpretation to grounds of refusal for enforcement of foreign award as
enumerated under Section 48 of the Arbitration & Conciliation Act.1996 as the
enforcing courts should refrain from entering into the substance of the
arbitration. The party in the receiving end oftenly raise objection on the
ground of limitation to resist and delay enforcement of the foreign award. This
may cause unnecessary delay in disposal due to lack of clarity as regards applicability
of limitation period. That Imbrogilo is now set to rest in Vedanta
Judgment and this will lead to expeditious disposal of enforcement applications.
There has been another significant dimension to it i.e the prevailing ambiguity
regarding limitation period applicable to the enforcement of a foreign award shall
in itself be a sufficient ground to condone the delay under Section 5 of the
Limitation Act. This has set at rest the predicament of the foreign award
holders who failed to commence enforcement proceedings in India within 3 years
from when the right to apply has accrued and they are now not left remediless.
However, another dimension that may need clarification
in due course is as to at what point of time the Limitation period commences
for enforcement of a foreign award. It need not necessarily be the date of the
foreign award and would ideally depend upon the facts of each individual case. For
instance, in a commercial relationships parties may explore to settle and time
may be consumed in that exercise, then, it may be difficult for the courts to
determine when exactly the cause of action could be reckoned for commencing the
enforcement proceeding. The Vedanta Judgment has cleared many ambiguity and
obscurity by pronouncing a definite position of law on the limitation period
for enforcement of a foreign award, still, the grey area remains and issues relating
to ‘right to apply’ in the context of determining limitation for enforcement of
foreign awards may need further clarity.
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