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Limitation Period for Execution of Foreign Decrees in India

In the present globalised world, international transactions between persons and business organisations are ever increasing. This complex interplay and interaction of the different economies is leading to convergence of amendments in laws and legal philosophy of various countries. One such example is law of limitation. This article focuses on how the international transactions have led to change in the jurisprudence on the law of limitation in India and the consequential implications.

Law of limitation in India is mainly governed by the Limitation Act, 1963, which prescribes the time limit in which any legal action can be instituted by an aggrieved party before any judicial forum. This law has always been considered as a procedural law in India. Interestingly, the Limitation Act, 1963 does not expressly provide any limitation period for execution of foreign decrees in India.

Foreign decrees in India are governed by the provisions of Section 44A and Order 21 of the Civil Procedure Code, 1963 (‘CPC’). In general, Section 44A stipulates that 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. It also casts an obligation on the party seeking execution to file a certified copy of the decree and a certificate from the superior court stating the extent which the decree has been satisfied or adjusted.

In the absence of express provisions, there have been conflicting judicial decisions on the limitation period for execution of foreign decrees in India. On the one hand, it has been held[2] that the cause of action for executing a foreign decree in India arises only after the application under Section 44A is filed, where after the limitation period provided under Article 136 of the Limitation Act, 1963 is applicable. On the contrary, it has also been held[3] that limitation period prescribed under Article 137 of the Limitation Act, 1963 is applicable for filing an application for execution of a foreign decree which starts from the date on which the foreign decree has been passed by the reciprocating territory.

In this context, it will be relevant to mention that Article 136 of Limitation Act, 1963 provides that the limitation period for execution of any decree (other than a decree granting a mandatory injunction) or court order is 12 years, whereas Article 137 is a residuary clause which provides 3 years limitation period for filing any other application for which no period of limitation is provided elsewhere.

This conflict has been settled by the Hon’ble Supreme Court of India vide its recent decision in Bank of Baroda vs. Kotak Mahindra Bank Ltd.[4] While settling the issue at hand, this judgement has also brought a change in the nature of the Law of Limitation in India.

In this case, the following issues came up for consideration before the 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?

 

  • 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?

It was argued by the Appellant that since no limitation has been provided under the Limitation Act, cause of action to file execution petition arises only when a Petition is filed under Section 44A of CPC. Dismissing these arguments, the Court held that, “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 the period of limitation.” The Court also made it clear that there is no fresh cause of action created vis-à-vis filing of an Execution Petition under Section 44A and a decree becomes enforceable the day it is passed.

Since the Court was dealing with execution of a decree passed by the High Court of Justice, Queens Bench, Divisional Commercial Court of London, it noted that the second issue was an issue of conflict of laws between the cause country (where the decree was passed i.e. England) and the forum country (where the decree is sought to be executed i.e. India). In this regard, the Court looked at how the position of limitation laws has changed in common law countries from procedural law to substantive law.

The Court observed that where the Decree-Holder fails to take steps towards execution of the decree within the stipulated time, it results into extinguishment of his right thereby giving corresponding right to the Judgement Debtor to challenge the execution of the decree. The Court also held that, in this sense, the law of limitation cannot be treated strictly as procedural law and has to be considered as substantive in cases where it leads to extinguishment of rights. Therefore, applying the conflict of law rules and considering laws of limitation as substantive law, it held that the limitation period for executing a foreign decree in India will be the limitation period prescribed in the reciprocating foreign country.

The Court answered the third issue in two eventualities which could possibly arise:

a.      In case, where the Decree Holder does not take any steps for execution of the decree in the cause country, the Court held that limitation period will start running from the date on which the decree is passed.

b.      In case, where the Decree Holder take steps-in-aid to execute the decree in the cause country and the decree is partially satisfied. Considering that in such cases, the Decree Holder will approach the Indian Courtsonly after the execution proceedings in the cause country have attained finality, the limitation period for filing an Execution Application under Order 21 Rule 11 of CPC shall be 3 years as prescribed by Article 137.

This decision by the Apex Court is a perfect illustration of the shift in legal philosophy and amendment in the laws as a result of international transactions. While it shows greater respect and interdependence on laws of other countries, it brings countries closer by assimilating global jurisprudence. Undoubtedly, it is also a welcome decision since it establishes some kind of certainty with respect to the limitation period for execution of foreign decrees in India and thereby placing India at par with other developed countries.

But, at the same time, we believe that while the Court rightly held that Law of Limitation of cause country was applicable for execution of foreign decrees in India, the same principle should have also been followed in case where the Decree Holder takes steps-in-aid to execute the decree in cause country. Rather, the Decree Holder should have the limitation period prescribed in the cause country to execute the decree in both cause country as well as forum country. This would make the process of execution of foreign decrees in India much simpler, quicker and time bound while making it difficult for the parties to delay the matter (which is a prominent feature of the Indian Legal System).

Thus, it is evident that the Supreme Court has also applied different standards while interpreting Articles 136 and 137 of the Limitation Act, 1963. While the Court interpreted that, “Article 136 only deals with decrees passed by Indian civil courts” on the ground that the words ‘including foreign decrees’ were not included in the Article, whereas while interpreting Article 137, it held that the Application to be filed for executing a foreign decree will be covered under the Article 137 since such application will not be covered in any other article of the Limitation Act, 1963. This has been observed by the Court even though Article 137 does not mention about applications for execution of foreign decrees. Possibly such distinction creates some confusion since application, under Order 21 Rule 11, for execution of foreign decree, has to be filed by the Decree Holder in either case whether or not the party has taken any steps for execution of the decree in the cause country, which eventually leads to different limitation periods in the two eventualities given above.

Nevertheless, the above decision is definitely a step forward and will govern the execution of foreign decrees in India till this interpretation is again challenged with further emergent issues and complexities.

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[1] By: Upinder Singh, Associate, Asia Law Offices.

[2] Refer Sheik Ali vs. Sheik Mohamed, AIR 1967 Mad 45.

[3] Refer Lakhpat Rai Sharma vs. Atma Singh, AIR (58) 1971 P&H 476.

[4] 2020 SCC OnLine SC 324.

Asia Law Offices advised a major transnational strategic collaboration between its client, UAE-Based Pharmax Pharmaceuticals, and Swiss pharma major Acino Pharmaceuticals.

ALO represented Pharmax in the structuring and closure of entire transaction documents of the significant collaboration.

The collaboration framework extends to licensing, manufacturing, and supply of Acino formulations within the gastroenterology and the cardiovascular space throughout the Middle East and Africa.