Urja Dhapre, Institute of Law, Nirma University
The Indian Supreme Court has ironed out the position of limitation period governing foreign decrees from reciprocating territories. The recent case of Bank of Baroda (“Appellant”) v/s Kotak Bank Ltd (“Respondent”)[i] has broken new ground by categorising limitation as a substantive requirement rather than being merely procedural. The upshot is the period of limitation for enforcing a foreign judgement in a reciprocating territory is now no longer determined by Indian law but instead depends on the law of limitation of the foreign country.
Indian courts’ previous exposition on limitation being a matter of procedure was regulated by the lex fori., i.e., by the local law. There was a defined private international law position proclaimed by various judgements of the Indian courts which has now been overturned.
Facts of the case
The Appellant bank commenced proceedings against Vyasa Bank, the predecessor of the Respondent bank, on 19.04.1993 in London apropos a dispute concerning a letter of credit. A foreign judgement was decreed by the High Court of London for an amount of US $ 1,267,909.26 along with interest in favour of the Appellant’s actions. The aforesaid decree was not challenged and attained finality in England.
After a lapse of 14 years, in 2009, the Bank of Baroda filed for an execution petition in India i.e., the forum country in terms of Section 44A of the Code of Civil Procedure, 1908 (“CPC”). The petition was challenged in the district court on the grounds of it being barred by a limitation period of 12-years as prescribed under Article 136 of the Limitation Act, 1963. After, the petition was dismissed both by the District and the High court, the Appellant reached the Supreme Court.
The pertinent question was “What is the limitation for filing an application for the execution of a foreign decree of a reciprocating country in India?”
Supreme Court’s Ruling
The Supreme Court in prefatory remarks stated Section 44A of the CPC[ii] to be an enabling provision and lays down procedural aspects, which permits an Indian Court to execute a foreign decree or award of a reciprocating territory, as if the decree or award had been passed by an Indian Court. The court however, held the execution proceedings under Section 44A of the CPC to be subjected to limitation.
Alluding international jurisprudence for determining the nature of limitation, the court concluded that mostly all the common law countries have incorporated the transition of limitation law undergoing from procedural to substantive. This conclusion of limitation being adopted as substantive, is precisely when it leads to extinguishment of rights and remedies.
India, therefore, can’t be the only exception to hold the law of limitation to be solely procedural.
The court further elaborated by stating two situations:
One where the decree holder doesn’t take any steps to execute the decree :
According to the court, the limitation period commences from the date, the decree or award was passed in the cause country. If the decree holder doesn’t avail any remedy to execute the decree in the cause country then his right to execute it in any country will stand virtually extinguished.
Since the law of limitation is held not to be merely procedural, that means a person who has lost his right or remedy to execute the foreign decree in the court of the cause country can’t take the advantage of the provisions of limitation period in the forum country.
In the present case, the limitation period prescribed in the UK will prevail i.e., 6 years. If he extinguishes his period of limitation in the cause country, he can’t plead a new cause of action for the limitation of forum country to apply.
Second where the decree holder takes steps in aid to execute the decree in the cause country :
Interestingly, if the decree holder takes any steps in aid to execute the decree in the cause country. The proceedings may go on and the decree may be executed, satisfied partly. In this view, a decree holder’s right to apply under Section 44A will entail only after execution proceedings have been finalised in the cause country. The application under Section 44A of the CPC will accrue within three years of the finalisation of the execution proceedings as enshrined under Section 137 of the Limitation Act.[iii]
Previous position of Indian Courts
Before this judgement, Indian courts considered foreign awards to be executed as Indian decrees wherein the limitation to such foreign awards was 12 years as imbibed in Article 136 of the Limitation Act.[iv]
In the recent judgement of Cairn India Ltd & ors v. Govt of India,[v] the court deliberated on the status and enforceability of the New York Convention award in India. The key question was whether an action to enforce an NYC award was time-barred by limitation. Proactively, the court divided the stages of execution of a foreign award into three stages: i. access ii. Recognition iii. Enforcement. It concluded that Article 136 of the Limitation Act, 1963 will apply to all those awards which have surpassed the stage of access and recognition of the court by section 47 of the Arbitration and Conciliation Act, 1996. It held the present enforcement petition to not be time-barred as the limitation period was 12 years in the case of foreign arbitral awards. This judgement brought clarity as now a foreign award holder could without any delay, proceed directly for execution in India, without having to wait for a ruling on any challenge to enforcement.
A similar view was held in NoyVallesina Engineering Spa v. Jindal Drugs Limited[vi] wherein the Bombay High Court stated that the enforcement petitions under section 47 of the Arbitration Act would indeed be governed by Article 137 of the Limitation Act, and would have a limitation period of three years. Once the court was of the view that the foreign award was enforceable, after satisfying the conditions required in Section 47 and 48 the party can then file for an execution of the said award under Section 49 within twelve years, as per Article 136 of the Limitation Act.
In the judgement of NNR Global Logistics (Shanghai) Co v. Aargus Global Logistics[vii] the Delhi High Court held that the Indian law of limitation is a procedural law as opposed to substantive law. Therefore, the issue of limitation in arbitration proceedings is governed by the curial law of the seat of arbitration.
The Supreme Court back in 2001 adopted an inconsistent view in Fuerst Day Lawson Ltd. v Jindal Exports Ltd[viii] to deem every final arbitral award as a decree of the Indian court. The Madras High Court held on similar lines in Compania Naviera ‘Sodnoc’ v. Bharat Refineries Ltd[ix], wherein the court dismissed the contention that the award holding party has to file a fresh and separate application for the enforceability. The Court held as per article 136 of the Limitation Act, the execution of any decree, the limitation period is 12 years. Recently, in Imax Corporation v. E-City Entertainment[x] the Supreme Court opined that the limitation period for foreign awards would be twelve years as per Article 136 of the Limitation Act.
The Supreme Court with this judgement, has settled the position of law with regards to the limitation period of enforcing foreign decrees from only reciprocating territories, and has resolved the unsettled position of the nature of limitation law. Since, the limitation law is subscribed to be a substantive law, the safest approach would be to file for an execution petition within three year from the date of decree passed under Article 136 of Indian Limitation Act, 1963, or limitation period of the cause country, whichever is earlier.
Further, the Supreme Court’s connotation of finalization of the execution proceedings is ambiguous in the sense that it doesn’t fully address the situations where the decree holder files for parallel proceedings in the cause country.
However, the position with respect to the limitation period for enforcing a foreign award is still not addressed. Article 136 of Limitation Period expostulates that foreign awards are deemed to be decrees of Indian Courts, and limitation period will be 12 years from the date a foreign award is passed. This stimulates an anomaly wherein foreign awards and foreign decrees have been treated differently, and will now minimize the commercial expectations of the foreign parties.
[i] Bank of Baroda v. Kotak Mahindra Bank, Civ. App. 2175/2015, Supreme Court of India (2020).
[ii] CIV. PRO. CODE §44A (India)
[iii] Limitation Act, No. 36 of 1963, Acts of Parliament § 137 (India).
[iv] Limitation Act, No. 36 of 1963, Acts of Parliament § 136 (India).
[v] Cairn India Ltd & Ors v. Govt of India, OMP (EFA) (COMM) 15/2016, Feb. 19, 2020 (Del. HC) (India).
[vi] NoyVallesina Engineering Spa v. Jindal Drugs Limited, 5 BCR 155 (2006) (India).
[vii] NNR Global Logistics (Shanghai) Co v. Aargus Global Logistics, 8 AD (Del) 125 (2012) (India).
[viii] Fuerst Day Lawson Ltd. v Jindal Exports Ltd, (2011) 8 SCC 333 (India).
[ix] Compania Naviera ‘Sodnoc’ v. Bharat Refineries Ltd, AIR 2007 (Mad) 251 (India).
[x] Imax Corporation v. E-City Entertainment, 1 AIR (Bom) R 82 (2020) (India).