Limitation period for execution of foreign decrees settled

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Limitation

The Supreme Court recently had the opportunity to ascertain the limitation period applicable to the execution of foreign judgments in India, which was an issue that lower courts had been struggling to resolve until now.

In the Bank of Baroda v Kotak Mahindra Bank case, the Bank of Baroda filed a suit in 1993 against Vysya Bank (the predecessor of Kotak) in London for recovery of its dues. Thereafter, a decree for US$1.2 million was passed by the High Court of Justice, Queens Bench, Divisional Commercial Court of London, in 1995.

After a lapse of almost 14 years, the Bank of Baroda in 2009 filed an application under section 44A of the Code of Civil Procedure (CCP), 1908, for execution of the decree before the Additional City Civil & Session Judge, Bengaluru. The application was opposed by Kotak, mainly on the ground that the same had not been filed within the period of limitation. The Sessions Court dismissed the application petition, holding that article 136 of the Limitation Act, 1963, applies and the execution petition should have been filed within 12 years of the decree being passed. The order was confirmed by Karnataka High Court.

In appeal, the following questions of law came up for the consideration of the Supreme Court:

  • Does section 44A of the CCP 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 territory) in India?
  • From which date will the period of limitation run in relation to a foreign decree (passed in a reciprocating territory) sought to be executed in India?

On the first issue, the Supreme Court rejected the argument that there is no limitation period for the execution of foreign decree in India, while observing that the term “application”, in section 3 of the act, shall be deemed to include execution petitions. The period of limitation shall be governed by the act and not by section 44A of the CCP, since the latter provides only for the procedure to be followed for executing a foreign decree.

On the second and third issues, the Supreme Court, while taking recourse to the principles of conflict of laws, and also noting that India has become a global player in the international business arena, observed that the limitation law of the cause country (which means the country in which the decree was issued, in this case, England), should be applied even in execution proceedings initiated in the forum country (the country in which the decree is sought to be executed, in this case, India). Since the Limitation Act leads to extinguishment of rights and remedies of the parties, it shall be considered as substantial law, and not merely procedural law.

The period of limitation shall be governed by the law of the cause country, and not the forum country. However, in cases where the law of the cause country is silent on the period of limitation, the law of the forum country will apply. Thus, in this case, for execution of foreign decrees in India, the law of limitation in the cause country (England) shall apply.

Further, for initiating proceedings under section 44A of the CCP, the period of limitation shall be governed by residual article 137 of the act, and not article 136 of the act, as the same deals only with decrees passed by Indian courts.

Thus, the period of limitation shall commence from the date on which the decree is passed in the cause country (England) and shall be governed by the laws of the cause country. The decree holder shall be at liberty to initiate execution proceedings in the cause country or the forum country (India) within the period of limitation of the cause country. However, the courts in India cannot entertain any execution proceedings that are initiated in India, beyond the period of limitation in the cause country.

In cases where the proceedings are initiated in India, in view of part satisfaction of the decree in the cause country, the period of limitation shall commence from the date on which the execution proceedings in the cause country are finalized, and the application under section 44A of the CCP can be filed within three years of the finalization of the execution proceedings in the cause country, as prescribed by article 137 of the act.

In view of these considerations, the Supreme Court dismissed the appeal filed by Bank of Baroda.

The dispute digest is compiled by Bhasin & Co, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.