In a recent judgment passed in Bank of Baroda vs. Kotak Mahindra Bank Limited[1],  a division bench of the Hon’ble Supreme Court of India comprising Justices Deepak Gupta and Aniruddha Bose, spelt out important principles of limitation applicable to execution of foreign decrees of reciprocating countries, in India.

1. Facts Leading to the Appeal:

• Bank of Baroda (“Appellant”) obtained a decree on February 20, 1995 against Vysya Bank (“Respondent’s Predecessor”)[2] for 1,267,909.26 USD along with interest in a suit filed before the High Court of Justice, Queens Bench, Divisional Commercial Court of London.[3] The decree was not challenged and attained finality. On August 5, 2009 i.e. 14 years after the decree was passed, the Appellant filed an execution petition for the decretal amount (“Execution”) against the Respondent’s Predecessor under Section 44A read with Order 21 Rule 3 of the Code of Civil Procedure, 1908 (“Code”), before the Additional City Civil & Sessions Judge, Bangalore (“Trial Court”).

• The Trial Court held that the Execution was time barred in view of the period of 12 years prescribed under Article 136 of the Limitation Act, 1963 (“Indian Act”) and accordingly dismissed the same. In an appeal preferred by the Appellant, the High Court upheld the Trial Court’s decision.

• Contentions of the Appellant:

• The Appellant contended that the Indian Act did not prescribe any period for execution of a decree passed in a reciprocating country. And at best, the principles of delays and laches, in the manner applicable to writ proceedings might apply to such an Execution.

• It was further contended that since the Indian Act prescribes no limitation period for execution of a decree passed in a reciprocating country, the cause of action to file Execution arises only when a petition is filed under section 44A of the Code[4]. Consequently, the limitation period of 12 years under Article 136 of the Act begins to run only from the date on which a petition is filed under section 44A of the Code.

• Contentions of the Respondent:

• The Respondent contended that the decree having been passed by the Court at London – the Limitation Act of 1980 of the United Kingdom (“English Act”) would apply in the instant case. The period prescribed under section 24 of English Act being 6 years, no Execution could be filed after February 20, 2001.

• Alternatively, the Respondent contended that even if the Indian Act was to apply, Execution was barred by limitation since the limitation period for Execution would be determined as per Article 136 of the Indian Act viz. 12 years.

• Issues as framed by the Hon’ble Court:

1. Does Section 44A 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?
2. What is the period of limitation for executing a decree passed by a foreign court (from a reciprocating country) in India?
3. From which date the period of limitation will run in relation to a foreign decree (passed in a reciprocating country) sought to be executed in India?

• What the Hon’ble Court held:

• Issue I:
• There is no concept of cause of action as far as execution is concerned; cause of action relates to civil suits and not to execution petitions. A decree becomes enforceable the day it is passed and hence, filing of an application under section 44A will not create a fresh period for enforcing the decree.
• Section 44A is only an enabling provision which enables the District Court to execute the decree as if the decree had been passed by an Indian Court. It does not deal with the period of limitation and only lays down the procedure to be followed by the District Court.

• Issue II:
• There is an increasing interaction and interplay between people across the globe, with more and more international business deals being done. All of this could lead to litigation which may have the cause in one country (“Cause Country”) but the judgment debtor may not have any property in the Cause Country. And the decree holder would have to go another country (“Forum Country”) to take benefit of the decree.

• The earlier view was that the law of limitation being a procedural law, the law of the Forum Country would govern the field. Indian Courts have also normally taken the view that the law of limitation is a procedural law, however, almost all common law countries have either brought a new legislation or by judicial decisions, have now taken the view that the law of limitation cannot be treated as a purely procedural law. India becoming an increasingly global player in the international business arena, it cannot remain one of the few countries where the law of limitation is considered entirely procedural.

• Additionally, in cases where the remedy stands extinguished in the Cause Country, it extinguishes the right of the decree holder to execute the decree and creates a corresponding right in the judgment debtor to challenge the execution of the decree. These are substantive and not procedural rights. The limitation for executing a decree passed by a foreign court from a reciprocating country will be the limitation prescribed in the reciprocating foreign country, subject to the decree being executable in terms of section 13 of the Code.

• Issue III:
• Article 136 of the Indian Act only deals with decrees passed by Indian Courts. The Indian Act was framed mainly keeping in view suits, appeals and applications to be filed in Indian Courts and wherever the need was felt to deal with things outside India, the Indian Act specifically deals with those situations. Article 39, for instance, specifically deals with dishonoured foreign bills whereas Article 101 deals with suits filed upon a judgment including a foreign judgment.

• The framers of the act specifically included the words ‘including a foreign judgment’ in Article 101 of the Indian Act. Accordingly, the legislature could have included foreign decrees in Article 136. In view of the omission of such ‘foreign decrees’ from the ambit of Article 136, it is evident that Article 136 would be confined to decrees of Indian Courts.

•  Further, in addition to a certified copy of the decree along with the certificate from the Court in the Cause Country, the Applicant is required to file a written application in terms of Order 21 Rule 11 (2). Such an application not being covered under any other Article of the Indian Act, would be covered under Article 137 of the Indian Act and the limitation period for filing the same would be 3 years.

• The question which then arises, is with regard to the date from which the Limitation of 3 years would start running. The Court envisaged two situations: (a) When the decree holder does not take any steps for execution of the decree during the period of limitation prescribed in the Cause Country, and (b) When the decree holder takes steps-in-aid to execute the decree in the Cause Country.

• In situation (a), the Hon’ble Court held that the decree holder having lost the right to execute the decree in the Cause Country, cannot be permitted to execute the decree in the Forum Country – to permit the execution of such a decree in the Forum Country would be against the principle adopted by the Court i.e. the law of limitation is not a procedural law but a substantive one. In the instant case, limitation under the Indian Act is 12 years for executing a money decree whereas, it is 6 years under the English Act. There may be countries where the limitation for executing such a decree may be more than 12 years; the right of the litigant in such a situation would not come to an end at 12 years and it would be governed by the law of the Cause Country. Accordingly, limitation would start running from the date on which the decree was passed in the Cause Country. And the period of limitation prescribed in the Forum Country would not apply.

• In situation (b), the Hon’ble Court held that proceedings in execution might go on for some time and it could be possible that the decree would be satisfied only partially. The judgment debtor may not have sufficient property or funds in the Cause Country to satisfy the decree. In such an eventuality, the right to apply under section 44A shall accrue only after execution proceedings in the Cause Country have attained finality. And the application under section 44A of the Code can then be filed in the prescribed form within 3 years from the date of finalisation of execution proceedings in the Cause Country.

• The Hon’ble Court further clarified that applying in the Cause Country for a certified copy of the decree or the certificate of part satisfaction of the decree, if any, would not be considered a step-in-aid to execute the decree.

• Concluding remarks:

The limitation period for executing a decree passed by a foreign court (from a reciprocating country) in India will be the period prescribed under the limitation laws of the reciprocating foreign country[5]. By holding so, the Hon’ble Court has crystallized the position that the law of limitation is a substantive law as opposed to being a procedural one. If the decree holder takes steps-in-aid of execution in the Cause Country and the decree is not fully satisfied, a petition for execution shall have to be filed within 3 years from the date on which execution proceedings in the Cause Country attain finality.

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[1] Judgment dated March 17, 2020 passed in Civil Appeal No. 2175 of 2020 in Special Leave Petition (Civil) No. 8123 of 2015.

[2] Vysya Bank was amalgamated into Kotak Mahindra Bank Limited on April 1, 2015.

[3] A letter of credit for 1,794,258 USD was issued by the Respondent’s Predecessor in favour of M/s Granada Worldwide Investment Company, London, on behalf of it’s customer M/s Aditya Steel Industries Limited. The Appellant was the confirming bank to this letter of credit. Pursuant to Instructions issued by the Respondent’s Predecessor to the Appellant’s London Branch on October 12, 1992, the Appellant’s London Branch discounted a letter of credit for 1,742,376.41 USD and made the payment to M/s Granada Worldwide Investment Company, London. On April 19, 1993, the Appellant filed a suit for recovery of its dues, against the Respondent’s Predecessor, in London. 

[4] This section provides inter alia that where a certified copy of a decree of any of the Superior Courts of any reciprocating territory has been filed in a District Court, the decree may be executed as if it had been passed by the District Court.

[5] Subject to the provisions contained in section 13 of the Code.