Bank of Baroda Vs Kotak Mahindra Bank Ltd. (Supreme Court)
SC held that The period of limitation shall be governed by the Act and not by Section 44A of the CPC, since the latter provides only for the procedure to be followed for executing a foreign decree
BRIEF FACTS.
1. Kotak Mahindra Bank Ltd. issued a Letter of Credit for US $1,794,258 on behalf of its customer M/s. Aditya Steel Industries Limited in favour of M/s. Granada Worldwide Investment Company, London.
2. The appellant Bank of Baroda was the confirming bank to the said letter of credit.
3. The Vysya Bank issued instructions to the London branch of the appellant on 12.10.1992 to honour the Letter of Credit. Acting on this instruction the London branch of the appellant discounted the Letter of Credit for a sum of US $ 1,742,376.41 and payment of this amount was made to M/s Granada Worldwide Investment Company on 13.10.1992.
4. Later in 2009, Bank of Baroda filed an Execution Petition against Kotak Mahindra Bank under Section 44A read with Order 21 Rule 3 of the CPC for recovery of Rs. 16,43,88,187.86.
5. The Execution Petition was filed in view of the decree passed by the High Court of Justice, Queens Bench, Divisional Commercial Court of London (UK Court) on 20 February 1995 for US$ 1,267,909.26 in favour of Bank of Baroda.
6. The maintainability of the Execution Petition was challenged primarily on the ground of limitation.
7. Major Issues in the case for the court to decide Issues that arose for consideration before the Apex Court:
1. Does Section 44A merely provide for the 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?
8. FINDINGS OF THE APEX COURT:
A. On issue no.1:
i) At the outset, the SC emphasized the change in the legal position after Section 44A was inserted in the Code in the year 1937. Prior to Section 44A, a decree passed by any court in a foreign country could not be executed in India and only a suit could be filed on the basis of the judgment passed by a foreign court. Section 44A brought about a change in law in respect of reciprocating countries, which agreed to respect the judgments and decrees passed in each other’s courts.
ii) Expressing disagreement with the first contention of the appellant that no limitation is applicable, SC held that the present proceedings being execution proceedings are not at par with writ proceedings. The word ‘application’ used in Section 3 of the Act is wide enough to include an application filed for execution of a decree, including a foreign decree. Therefore, the principles of delay and laches, which may be applicable to writ proceedings, cannot be applied to civil proceedings and are not at all attracted in proceedings filed under the Code, which must be filed within the prescribed period of limitation.
iii) Turning down the second contention of the appellant the SC held that there is no concept of cause of action in so far as an execution petition is concerned. Cause of action is a concept relating to civil suits and not to execution petitions. In case of a decree, it becomes enforceable the day it is passed. Therefore, filing of an application under Section 44A will not create a fresh period for enforcing the decree. The clock of limitation cannot be kept in abeyance at the choice of the decree holder. SC disapproved the view taken by a Full Bench of the Madras High Court in the case of Sheik Ali vs. Sheik Mohamed that limitation will start running on filing of an application under Section 44A.
iv) SC held that 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 and it does not deal with the period of limitation.
v) The Apex Court accordingly answered issue no.1 by holding that Section 44A only enables the District Court to execute a foreign decree and further provides that the District Court shall follow the same procedure as it follows while executing an Indian decree, but it does not lay down or indicate the period of limitation for filing such an execution petition.
B. On issue no. 2:
i) Conscious of the effect of economic globalization leading to widespread international and cross-border transactions, SC delved upon a question that if the decree is to be executed in another jurisdiction, which law should apply? Whether the law of limitation as applicable in the cause country or forum country would apply? The expressions cause country’ and ‘forum country’ would mean the country in which the decree was passed (i.e., England in this case) and the country in which the decree is sought to be executed (i.e., India in this case), respectively.
ii) If Article 136 of the Act is to apply then the period of limitation for filing application seeking execution of any foreign decree would be 12 years regardless of the limitation which may be prevalent in the country where the decree was passed i.e., cause country, which is 6 years in terms of Section 24 of the Limitation Act, 1980 of the United Kingdom.
