In its judgement dated 17 March 2020, the Supreme Court in Bank of Baroda v. Kotak Mahindra Bank Ltd ruled on the limitation period applicable to the execution of foreign decrees in India, after it recorded contrasting views of the different state High Courts on the issue. It held that the limitation period for making an application for execution of a foreign decree in India would be three years from the date on which the right to apply accrues. It is pertinent to note that till date there was no limitation period clearly specified for the execution of a foreign decree in India.
The High Court of Justice, Queens Bench, and Divisional Commercial Court of London on 20 February 1995 passed a money decree for US$ 1,267,909.26 in favour of the Bank of Baroda and against Vysya Bank, which was the predecessor of Kotak Mahindra Bank. In 2009, after almost 14 years of the passing of the foreign decree by the London Court, the decree holder i.e., Bank of Baroda, filed an execution petition in India for execution of the same in terms of section 44A of the Code of Civil procedure, 1908 (CPC) for recovery of Rs.16,43,88,187.86. Pertinently, this petition was challenged as being time barred, on the ground that it was not filed within the period of limitation laid down by the statute. The District Court held that the execution petition was time barred, since it was not filed within 12 years of the decree being passed by the London Court. This decision was confirmed by the High Court. Aggrieved by the decisions, Bank of Baroda approached the Supreme Court for determination on a short but interesting issue, i.e.: “what is the limitation for filing an application for execution of a foreign decree of a reciprocating country in India?”
Issues Considered by the Court
- What is the limitation for filing an application for execution of a foreign decree of a reciprocating country in India?
- From which date will the period of limitation run in relation to a foreign decree (passed in a reciprocating country) sought to be executed in India?
Issue No. 1
The Supreme Court drew a distinction between the ‘cause country ‘and the ‘forum country’. It explained that the ‘cause country’ is where the decree was passed, i.e., the United Kingdom (UK), and the ‘forum country’ is where the decree so passed is sought to be executed, i.e., India. The Supreme Court noted that there exists an issue of conflict of laws in this case between the ‘cause country ‘and the ‘forum country’. The Court observed that the limitation period for executing a decree in England and India are entirely different, and this might lead to confusion while executing the foreign decree.
The Court took recourse to the Principles of Private International Law and relied upon and referred to various elements of the literature and international jurisprudence to answer the question and resolve the conflict and ambiguity. While referring to the laws in the UK and the United States of America (USA), the Court observed that the Limitation Act of India cannot be only procedural in nature and should be treated as a substantive law. This is because the Limitation Act ultimately quenches the rights and remedies of the parties. The Court mentions how the USA has adopted the Uniform Conflict of Laws Limitation Act, 1982.
Negating the contention of the Bank of Baroda, the Court held that the applicable limitation period for executing the decree by a foreign court (from reciprocating country) in India will be actuated and governed by the law of the cause country and not the forum country. The Court ascertained that the limitation law of the cause country should be applied even in the forum country, provided that the law of a forum country is silent on the limitation period for execution of a decree.
Issue No. 2
In order to answer this question, the Court analysed both the disputed provisions, i.e., articles 136 and 137 of the Limitation Act to decide the correct provision that will govern the period of limitation for filing the application along with the execution petition. The Court held that this application will be covered under article 137 of the Limitation Act, and thus the applicable limitation period for filing an application for execution of a foreign decree in India would be three years from the date on which the right to apply accrues because Article 136 only deals with the decrees passed by Indian civil courts and not foreign courts.
Consequently, the Court finally adjudicated that the period of limitation would start running from the date the decree was passed in the foreign court of a reciprocating country. But, in case a decree holder takes steps in-aid to execute the decree in the cause country and then, after some time, the decree is satisfied partly but not fully in the cause country, then the period of limitation shall commence from the date on which the execution proceedings in the cause country are finalised.
This judgment of the Supreme Court is a welcome step because it draws attention to the limitation period applicable for execution of a foreign decree in India, which was long pending to be resolved. Due to contrasting views of the different High Courts, the District courts were subject to the ambiguities of the law applicable to this issue. This judgment would finally give a much needed to not only to the District Courts but also the foreign parties who were apprehensive of the correct law in this regard. This judgment is relevant in ascertaining the role of court while applying the principles of conflict of laws in resolving cross-border disputes.
– Ankit Tripathi