Foreign Judgments in the context of Indian Law and Enforcement of Arbitral Awards

By Shreesha Bhatt, Shivansh Agarwal & Ashutosh Gondli, GNLU

Editor’s Note: This paper deals with the enforcement of foreign judgments in India and also discusses the enforcement of Arbitral Awards.

INTRODUCTION

A decree in India, either foreign or domestic, has to be enforced under provisions of the Civil Procedure Code, 1908 (CPC). Section 2(6) of the Code defines a “foreign judgment” to mean any judgment of a foreign court. Section 2(5) of the Code defines a ‘foreign court’ to mean a Court outside India and not established or continued by the authority of the Central Government. CPC sections that deal with foreign judgment/decrees are Section 13, Section 14 and Section 44. Section 13 embodies the principle of Private International Law that court will not enforce a foreign judgment if the judgment is not that of a competent court. The rules laid down under section 13 are of substantive law, as well, along with being that of procedural law.[i]

What is Section 13?

Section 13 lays down the basic rules, which should not be violated by any foreign court in passing a decree/judgment. Every foreign judgment/ decree has to pass these ‘tests’ laid down under Section 13 of the CPC.[ii] In deciding whether the same is conclusive, courts in India will not consider whether are supported by evidence or are otherwise correct, because its binding character may be displaced only by establishing whether the case calls within one or more of the six clauses in Sec. 13.[iii] If the judgment falls within one or more clauses of section 13, it will cease to have a conclusive value as to any matter thereby adjudicated upon and will be open to attacks from the opposing party on the grounds mentioned in Section 13.

A foreign judgment acts conclusive as to any matter it is directly adjudicated upon, excluding the reasons for judgment. Section 13 enacts a branch of the rule of res judicata in its relation to foreign judgments. The expression “matter” does mean “subject-matter”; but the rights claimed by the parties.

Distinction from Res Judicata

Conclusiveness rule of foreign judgment is slightly different in its operation from the rule of res judicata. Res judicata is applicable to all matters in contention in a previous suit and included matters which might and ought to have been ground of attack or defense in the former suit. The rule of conclusiveness of foreign judgment applies only to matters directly adjudicated upon. Evidently, therefore, every issue finally heard and decided in a foreign court is not conclusive between the parties. What is conclusive is the judgment.

Understanding Section 14  

Section 14 merely states the presumption an Indian court takes when a document supposing to be a certified copy of a foreign judgment is presented before it. The Indian Courts presume that a Court of competent jurisdiction pronounced the judgment, unless the contrary appears on the record, but proving want of jurisdiction may displace such presumption.[iv]

Principles of foreign judgment enforcement  

Courts may look into CPC or any other statute while considering the procedure to be followed for enforcement of foreign awards under Foreign Awards (Recognition and Enforcement) Act (45 of 1961).[v]  The basis of the enforcement of a foreign judgment is that the judgment imposes an obligation upon the defendant and therefore there must be a sufficiently close between him and the forum to make him perform his obligations and duties. Foreign judgment may be enforced by

  • Proceedings in execution under Section 44
  • By a suit upon it in a domestic court.

Limitation Period specified

The period of Limitation to approach a court with respect to a foreign judgment/decree is 3 years under section 101 of the Limitation Act, 1963.

Decree in ‘Absentem’

A decree by a foreign court against a defendant in absentem is a nullity.[vi] In such a situation, it is incorrect to say that the decree is affected only from the defect of enforceability by execution. The decree is valid and executable in the country of the forum by which it was pronounced when authorized by special local legislation. Therefore, the belief that such a decree is absolute may be incorrect. It is more appropriate to say that the decree in question is unexecutable outside that country.[vii]

Decree/Judgment should originate from a court of competent jurisdiction

A foreign judgment to be conclusive must be by a court of competent jurisdiction and the so called competence must be in an international platform, and not merely by the law of the foreign state, which delivered the judgment.[viii] This is decided in accordance with the principles of private international law.[ix] The action of the foreign court, when it is considered of having competent jurisdiction, act in personam.[x]

These are the circumstances which would give competent jurisdiction to courts:[xi]

  • Where the person is a subject of the foreign country in which the judgment has been obtained against him on prior occasions
  • Where he is a resident of a foreign country when the action is commenced
  • He was temporarily present in the foreign country when the process was served on him
  • Where he in his character as plaintiff in the foreign actions selects the court as the forum for taking action in the capacity of a plaintiff, in which forum he is sued later
  • Where the party on the summons voluntarily appears
  • Where by an agreement a person has contracted to submit himself to the forum in which the judgment is obtained.

A foreign judgment suit can be effective in a Court in this country even though the foreign court had no jurisdiction if the defendant submitted to the jurisdiction and defended in without any objection. When the defendant submits to the jurisdiction of foreign court by falling written statement the decree passed by it is valid and executable.[xii]

Requirement for Reciprocation – Section 44

When it comes to the enforcement of a foreign Judgment, it can be either enforced under Section 44 of CPC or by filing a suit upon the foreign judgment/decree.[xiii] Section 44 is an independent section, not controlled by any other section or read with any other section. The country whose foreign judgment can be enforced depends upon the fact that if it has any reciprocating status in law. A country, which has a reciprocating status, its judgment/decree, can be executed directly by an Indian court. A judgment/decree by a non-reciprocating country is not directly enforceable under the Indian courts. A suit has to be filed pertaining to the issue at hand, where the judgments/decree by a non-reciprocating country will be treated of evidentiary value.

Reciprocity applies to the law existing in the country of origin. If the judgment is barred by virtue of limitation in that country it cannot be enforced here even though a larger period of limitation is available. There is no period of limitation for the filing of a certified copy. The right to apply for execution accrues on and from the date of filing under S. 44 A (I) and the article of Limitation Act applies.

Default of Appearance – Sub Section 3

A foreign Decree passed solely due to default of appearance will not be considered as passed on merits, under Section 13 (b), hence, its execution can be resisted on the grounds of inconclusiveness.[xiv]

ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

There has been a magnanimous growth in the number of foreign arbitral cases involving Indian Parties, where both, the governing law as well as the seat of arbitration is of a foreign country. Awards arising as a result of settlement of such arbitration disputes are of high importance. For such awards shall be rendered meaningless if these awards are not enforced without hurdles, proper enquiry, and review by the courts where enforcement is sought. An arbitration award can only be enforced when the courts of the country where enforcement is sought make an order.[xv] This principle of enforcement is also reflected by the way the Indian system works.  In India, foreign arbitration awards, in terms of enforcement, were governed by the Foreign Awards (Recognition and Enforcement) Act 1961 (“the Act”) which gave effect to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958.[xvi] India had made two reservations while ratifying the Convention, namely –

  1. a) That it would apply the Convention to the recognition and enforcement of an award only if it was made in the territory of another reciprocating contracting state; and
  2. b) That it would apply the Convention only to differences arising out of legal relationships which were considered as commercial under Indian law.[xvii]

Article 1 of the New York Convention and Section 7 of the act are in conformity with each other. Article 1(i) of the New York Convention states that:

“This convention shall apply to the recognition and enforcement of arbitral awards made in the territory of the state other than the state where the recognition and enforcement of such awards is sought, and arising out of differences between persons, whether physical or legal”[xviii]

Section 7 of the Act, which corresponds with the provisions of the New York Convention, specifies that a foreign award may not be enforced if the party against whom the award is sought to be enforced proves to the court enforcing the award any of the following:

(1) that the parties to the arbitration agreement were, under the law applicable to them, under some incapacity, or the arbitration agreement was not valid under the law to which the parties have subjected it (or, in the absence of any condition thereon) under the laws of the place of arbitration;

(2) that there was no due compliance with the rules of fair hearing;

(3) the award exceeded the scope of submission to arbitration;

(4) the composition of the arbitral authority or its procedure was not in accordance with the arbitration agreement of the parties or (failing such agreement) was not in accordance with the law of the place of arbitration;

(5) the award has not yet become binding on the parties, or has been set aside, or suspended by a competent authority of the country in which the award was made;

(6) if the court dealing with the award is satisfied that (a) the subject-matter of the difference is not capable of settlement by arbitration under the law in India; or (b) the enforcement of the award will be contrary to public policy[xix]

An arbitration award made outside India is quite different from a foreign judgment, as can be seen above. Identical with foreign judgments, the Act deals with the question of enforcement of awards of a foreign reciprocating territory as defined in it.[xx] Any person who is interested in enforcing a foreign award may apply in writing to any court having jurisdiction over the subject matter of the award. The application will be numbered and registered in the court as a suit between the applicant, as the plaintiff, and the other, as defendants. The court will direct a notice to the parties requiring them to show cause why the award should not be filed in the court. The court, on being satisfied that the foreign award is enforceable under the Act, will pronounce judgment on it. A decree will follow. No appeal will lie from such a decree except insofar as the decree is in excess of or not in accordance with the award.

DOMESTIC DEGREE OR FOREIGN DECREE? A CONTEMPLATION

Many a times, disputes may arise between Indian parties over international matter and transactions. The parties have an option of instituting a suit in the concerned foreign country and then enforcing it through an Indian Court under Section 44 or instituting a suit in India and enforcing it accordingly. The parties may have to wait in the latter case, but the Limitation Period prescribed is more than enough to file a suit and enforce it in the Indian Courts only. It can be seen that, the plaintiff has to come to the Indian courts to either get the foreign judgment executed under S. 44A or file a fresh suit upon the judgment for its enforcement. Therefore by getting a decree in the foreign Court, the plaintiff only avoids the inconvenience of leading evidence in the Indian Courts but runs a much bigger risk under S. 13. Therefore it may be advisable for a foreign plaintiff to institute claims in India itself in case the defendant is in India. Since international transactions would involve more of documentary evidence and that comparatively leading of evidence may not be that inconvenient, it may be advisable to avoid the risk under S. 13 and file claims in India itself.

Edited by Hariharan Kumar

[i] Moloji v. Shankar [1962] SCC 1737 (SC)

[ii]  Section 13: A foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title except.

(a) Where it has not been pronounced by a court of competent jurisdiction;

(b) Where it has not been given on the merits of the case;

(c) Where it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable;

(d) Where the proceedings in which the judgment was obtained are opposed to natural justice;

(e) Where it has been obtained by fraud;

(f) Where it sustains a claim founded on a breach of any law in force in India.

[iii] Vishwanath v. Abdul Wajid [1963] SCR 1 (SC)

[iv]  Code of Civil Procedure, 1908.

[v] Orient Middle v. Brace Transport is an authoritative case on this point.

[vi] Gurdayal v. Raja of Faridkot; Subramaniam v. Srinivasa [1956] RLR 81 (Raj) FB; Kukadeep v. Godmatia [1962] AP 400 (FB)

[vii] Lalji Raja v. Hansraj [1971] SCC 974 (SC)

[viii] Supra note. 3

[ix] Rama v. Krishna [1939] MCR 33 (FB)

[x] Vareed v. Gopalbai [1954] T-C 358 (FB)

[xi] Sudipto Sarkar and V.R. Manohar, Sarkar Code of Civil Procedure, 10th ed., Vol. I, 2004

[xii] Narhari v. Pannalal [1977] SCC 164 (SC)

[xiii] Rishi Agrawala, ‘Executability & Enforceability of Foreign Judgments and Decrees in India:
Judicial Trends’, Agarwal Law Associates, (https://www.google.co.in/search?client=safari&rls=en&q=Rishi+Agrawala,+‘Executability+%26+Enforceability+of+Foreign+Judgments+and+Decrees&ie=UTF-8&oe=UTF-8&gws_rd=cr&ei=NXssUs_cBdHHrQeZ7IC4Dw# (2010) (Accessed: 2nd September, 2013).

[xiv] Vellachi Achi v. Ramanathan (1973) MCR 14 (MHC)

[xv] Shrikant Hathi (Dr) and Binita Hathi (Ms), Partners, Brus Chambers, Advocates & Solicitors, “Execution of Foreign Decrees, Ship Arrest in India and Admiralty Laws in India,” 2012.

[xvi] Ibid

[xvii] Ibid.

[xviii]United Nations Commission on International Trade Law, Convention on the Recognition and Enforcement of Foreign Arbitral Awards ,New York (Adopted 1958, Entered into force on June 7 1959) (UNCITRAL)

[xix] Foreign Awards (Recognition and Enforcement) Act, 1961 Section 7.

[xx] So far, the Government has notified the following countries for that purpose: United Kingdom, the Netherlands, United States of America, Sweden, Syria, Philippines, Thailand, Austria, Germany, Switzerland, Czechoslovakia, Russia, Finland, Greece, Ecuador, Bulgaria, Romania, Norway, Poland, Hungary, France, Germany, Japan, Tanzania, Nigeria, Tunisia, Ghana and Morocco

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