25 March, 2020
In its recent decision in Bank of Baroda v. Kotak Mahindra Bank[1], the Supreme Court has ruled on the limitation period applicable for execution of a foreign decree under Section 44A of the Code of Civil Procedure, 1908 (“CPC”), after considering the previously divergent views of different High Courts on the issue.
Background
Foreign decrees can only be executed in India under Section 44A of the CPC if they have been passed by a ‘superior court’ of any ‘reciprocating territory’. Reciprocating territories and superior courts are notified by the Central Government from time to time.[2] Further, only decrees or judgments under which a sum of money (other than taxes or other charges of a like nature or a fine or other penalty) is payable can be executed under Section 44A of the CPC.[3] Section 44A(1) provides that where a certified copy of a foreign decree has been filed in a District Court, the decree may be executed as if it had been passed by the District Court.
The Madras High Court View
In Sheik Ali v. Sheik Mohamed, [4] the Madras High Court took the view that the effect of Section 44A(1) was only to make the procedure for execution of Indian decrees also applicable to execution of foreign decrees. The limitation period for execution of an Indian decree, i.e. 12 (twelve) years from the date of the decree[5], does not apply to execution of a foreign decree under Section 44A. Instead, what applies is the residuary provision, i.e. 3 (three) years from the date on which the right to apply accrues[6] and the right to apply accrues only after a certified copy of the foreign decree has been filed in a District Court. Further, while there is no limitation period for filing a certified copy of the foreign decree as aforesaid, a foreign decree cannot be executed in India if its enforcement is barred by limitation in the cause country (i.e. the reciprocating territory whose court passed the decree).
The Punjab & Haryana High Court View
In Lakhpat Rai Sharma v. Atma Singh,[7] the Punjab & Haryana High Court took the view that the effect of Section 44A(1) is to treat a foreign decree as an Indian decree for all purposes. In other words, the limitation period for making an application for execution of an Indian decree, i.e. 12 (twelve) years from the date of the decree[8], also applies to an application for execution of a foreign decree under Section 44A.
The Supreme Court Decision
The Supreme Court has now taken the view that Section 44A only empowers the District Court to execute the foreign decree as if it had been passed by the District Court and does not deal with the period of limitation.
Accordingly, the limitation period for making an application for execution of an Indian decree, i.e. 12 (twelve) years from the date of the decree[9], does not apply to an application for execution of a foreign decree under Section 44A. Instead, the applicable limitation period will be determined by the law of cause country (i.e. the reciprocating territory whose court passed the decree). At the same time, the limitation period for making an application for execution of a foreign decree in India is 3 (three) years from the date on which the right to apply accrues.[10] On the issue of when such a right to apply accrues, there are two situations:
- If the decree-holder does not take steps to execute the decree in the cause country, then the right to apply accrues when the decree was passed by the foreign court.
- If the decree-holder takes steps to execute the decree in the cause country and the decree is not fully satisfied, then the right to apply accrues when the execution proceedings in the cause country are finalised.
Concluding Observations
While the Supreme Court’s decision brings some welcome clarity on the issue of limitation period generally, some issues which District Courts and High Courts, following this decision, will have to consider going forward are as follows:
- If the decree-holder takes steps to execute the decree in a country other than the cause country, does the right to apply for execution in India under Section 44A accrue when the execution proceedings in such a country are finalised or does it accrue when the decree was passed by the foreign court?
- If the decree-holder has taken steps to execute the decree in the cause country, can the decree-holder make an application in India under Section 44A before such execution proceedings in the cause country are finalised?
- If the limitation period as per the law of the cause country is longer than three years (e.g. six years), can the decree-holder make an application in India under Section 44A after three years from the date of the decree without first taking steps to execute the decree in the cause country?
Although the answers to some of the above issues may be inferred from the Supreme Court’s judgment itself and others may have been the subject of earlier High Court decisions[11], this decision will result in the above issues having to be examined and/or re-examined by District Courts in the near future.
Until then, the safe approach for foreign decree-holders will be to make an application under Section 44A within three years from the date of the foreign decree or within the limitation period under law of the cause country, whichever is shorter. However, if the decree-holder takes steps to execute the decree in the cause country, then the application under Section 44A can be within three years from when the execution proceedings in the cause country are finalised.
For further information, please contact:
Adarsh Saxena, Partner, Cyril Amarchand Mangaldas
adarsh.saxena@cyrilshroff.com
[1] Judgment dated March 17, 2020 in Civil Appeal No. 2175 of 2020.
[2] Explanation 1 to Section 44A of the CPC.
[3] Explanation 2 to Section 44A of the CPC.
[4] AIR 1967 Mad 45.
[5] Article 136 of the Limitation Act, 1963. Earlier, under Article 182 of the Limitation Act, 1908, it was 3 (three) years from the date of the decree.
[6] Article 137 of the Limitation Act, 1963 (earlier Article 181 of the Limitation Act, 1908).
[7] AIR 1971 P&H 476.
[8] Article 136 of the Limitation Act, 1963. Earlier, under Article 182 of the Limitation Act, 1908, it was 3 (three) years from the date of the decree.
[9] Article 136 of the Limitation Act, 1963.
[10] Article 137 of the Limitation Act, 1963.
[11] See for instance the judgment of the Punjab & Haryana High Court in Karnail Singh Sandhar v. Sandhar and Kang Ltd., MANU/PH/3486/2010, holding that, in the context of Section 44A of the CPC, there is no bar in seeking simultaneous execution of a foreign decree in India.
