Enforcement of Foreign Judgements And Awards In India

The procedure for enforcement of foreign arbitral awards in India is enshrined in the Arbitration and Conciliation Act, 1996. Section 47 of this Act describes the evidence to be adduced by a claimant seeking enforcement of an award while Section 48 lists out defenses to be proved by the party contesting it

The recent boom in foreign investment coupled with globalisation and transformation in Indian development has led to an increase in international legal disputes. Controversies see entities in different countries, especially those which are commercial in nature, rake up a variety of issues such as jurisdiction, governing law etc.

In order to overcome some of these issues, many parties opt to insert arbitration clauses in their international commercial contracts and agreements. The procedure for enforcement of foreign arbitral awards in India is enshrined in the Arbitration and Conciliation Act, 1996. Section 47 of this Act describes the evidence to be adduced by a claimant seeking enforcement of an award while Section 48 lists out defenses to be proved by the party contesting it.

The Court may suo moto refuse to enforce a foreign award if the award is contrary to public policy or is in respect of a matter which is not capable of settlement by arbitration under Indian law. Section 49 stipulates that when a Court is satisfied that the foreign award is enforceable, it shall be deemed to be a decree of that Court.

In international disputes which are not governed by arbitration, aggrieved parties are often constrained to seek remedies through civil litigation. Litigation in foreign countries can sometimes prove challenging to 'outsiders' and moreover, favourable decrees are often rendered otiose when the Decree Holder is unable to enforce the decree in question. Judgement Debtors to foreign decrees are also known to seek shelter behind international borders and take advantage of inconsistent legal mechanisms to evade liability, even after findings of violation of a competent albeit foreign court.

In order to ensure that a successful party is not armed merely with a foreign 'paper decree' with no scope for enforcement, there exist mechanisms for the enforcement of foreign decrees in India.

The enforcement of a foreign decree in India required a Decree Holder to, at the outset, identify whether or not the country in which the decree was passed is a 'Reciprocating Territory'.

'Reciprocating Territories' are countries/territories outside India which the Central Government has declared to be a reciprocating territory. 'Superior Courts' similarly refers to courts within those territories which are declared to be a superior court also through a notification in the official gazette and for the purpose of Section 44A of the Code. The countries/territories presently recognised as Reciprocating Territories in India are Aden, Fiji, Republic of Singapore, Federation of Malaya, Trinidad and Tobago, New Zealand, the Cook Islands (including Niue) and the Trust Territories of Western Samoa, Hong Kong, Papua and New Guinea, Bangladesh, United Kingdom and the United Arab Emirates.

The procedure for the execution of a decree passed in a Reciprocating Territory has been codified into Section 44-A of the Code of Civil Procedure, 1908, which provides that where a certified copy of a decree passed by any of the 'Superior Courts' in 'Reciprocating Territories' has been filed in a District Court, the said decree may be executed in India as of it had been passed by the District Court. Simply put, a decree passed by a competent court in a Reciprocating Territory can be enforced in India directly through an execution petition for enforcement of said decree.

On the other hand, if the decree is passed by a competent court in non-reciprocating territory, the Decree Holder will be required to institute a civil suit in a court having jurisdiction which will examine the enforceability of the decree.

The enforceability of a foreign decree is subject to the conclusiveness of the decree. Section 13 of the Code of Civil Procedure, 1908, provides for 6 circumstances that render a foreign judgement inconclusive and thus unenforceable in India, which are as follows:

(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 judgement 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.

A foreign judgement which falls under any of the clauses provided under Section 13(a) to (f) is open to a collateral attack by the Judgement Debtors. If the tests are satisfied, the Court will pass a decree which can be executed in India like any other domestic decree.

There have been a string of decisions passed by a number of Indian Courts with respect to enforcement of foreign decrees in India. Common defense taken by Judgement Debtors and the notable findings include:

A. Decree was not passed on merits

• An ex-parte decree passed against the Defendants who did not appear in spite of receipt of summons is unenforceable in India
  
  Moloji Nar Singh Rao v. Shankar Saran [AIR 1962 SC 1737]
• A decree passed in absentem is a total nullity as a foreign judgement.
  
  Kukadap Krishna Murthy v. Godmatla Venkata Rao [AIR 1962 A.P. 400]
• An ex-parte decree wherein the defendants were served with the summons is not necessarily opposed to natural justice.
  
  Lalji Raja & Sons v. Firm Hansraj Nathuram [AIR 1971 SC 974]
• A decree obtained on default of appearance of the defendant without any trial on evidence is a case where the judgement must be held not to have been on the merits of the case and thus such a decree could not be enforced in India.
  
  R.E. Mahomed Kassim & Co. v. Seeni Pakir-bin Ahmed
• A decree passed mechanically in accordance with a prescribed Rule and in the absence of any controversy or proper adjudication is not on the merits of the claim and is not conclusive within the meaning of Section 13 of the Code.
  
  Gudemetla China Appalaraju v. Kota Venkata Subba Rao
• An ex-parte judgement and decree where the plaintiff had not led evidence to prove his claim before the Court, was not executable under Section 13(b) of the Code.
  
  Gurdas Mann v. Mohinder Singh Brar
• The passing of a decree after refusing the leave to defend sought for by the defendant is not a conclusive judgement within the meaning of Section 13(b) of the Code.
  
  K.M. Abdul Jabbar v. Indo Singapore Traders P. Ltd.
• A decree in a foreign court passed ex-parte, will be binding if evidence was taken and a decision passed on consideration of the evidence. However, a decree passed against the Defendant solely on account of his failure to make the payment of the security, is not enforceable in India under Section 13(b) of the Code.
  
  M.K. Sivagaminatha Pillai v. K. Nataraja Pillai
• An ex-parte decree passed in a suit where summons were issued but never served is opposed to principles of natural justice and thus inconclusive and unenforceable.
  
  I&G Investment Trust v. Raja of Khalikote

B. Parties did not submit to the jurisdiction of the Court passing the decree

Section 13 of the Code of Civil Procedure, 1908, provides for 6 circumstances that render a foreign judgement inconclusive and thus unenforceable in India

• A decree against a partner of a firm which accepted the jurisdiction of the foreign Court, is not conclusive unless the partner accepted the jurisdiction in an individual capacity.
  
  R.M.V. VellachiAchi v. R.M.A. Ramanathan Chettiar [AIR 1973 Mad. 141]
• The factum of entering into a contract in the foreign country, does not lead to the inference that the Defendant had agreed to be bound by the decisions of the Courts of that country and the decree passed against the Defendants on such a basis is inconclusive and unenforceable.
  
  K.N. Guruswami v. Muhammad Khan Sahib [AIR 1933 Mad 112]
• Where the natural guardians had not entered appearance on behalf of the minors, the minors could not be said to have submitted to the foreign court's jurisdiction and therefore, the judgement qua them was a nullity.
  
  Sankaran v. Lakshmi [AIR 1974 SC 1764]
• The factum of a contract being made in the foreign country did not clothe the foreign court with jurisdiction in an action 'in personam' since a person cannot be held to have submitted to the jurisdiction of a foreign court if his attempt to get the ex-parte decree set aside fails. A submission to the jurisdiction of a foreign court has to be before the foreign decree is passed.
  
  Ramkisan Janakilal v. Seth Harmukharai Lachminarayan
• Failing in an action to set aside a foreign decree in the foreign Courts does not amount to submission to jurisdiction. However, if the decree is set aside and the party enters appearance and presents its defense subsequent to which a new decree is passed, the Defendant would be deemed to have submitted to the jurisdiction of the foreign court.
  
  Narappa Naicken v. Govindaraju Naicken [AIR 1934 Mad. 434]
• If a party has previously instituted proceedings before a foreign court, it does not mean that he is forever bound to having submitted to the jurisdiction of the foreign court in any subsequent action brought against him.
  
  Thirunavakkaru Pandaram v. Parasurama Ayyar [AIR 1937 Mad. 97]
• The mere factum that the impugned transaction was effected at the time when the deceased Defendant's Constituted Attorney was residing in the foreign country, does not amount to submission to the jurisdiction of the foreign Court.
  
  VithalBhai ShivaBhai Patel v. Lalbhai Bhimbhai [AIR 1942 Bom 199]

C. Decree obtained by Fraud

• Where the plaintiff had misled the foreign court (which was not vested with competent jurisdiction) as to its having jurisdiction over the matter, the judgement and decree was obtained by fraud and hence was inconclusive and unenforceable in India.
  
  Satya v. Teja Singh
• An action to set aside a judgement cannot be brought on the ground that it has been decided wrongly on merits, but can be set aside if the Court was imposed upon or tricked into giving the judgement.
  
  Sankaran v. Lakshmi
• Where the plaintiff had misled the court regarding his residence (domicile), the decree was obtained by making false representation as to the jurisdictional facts, and thus by fraud and hence was inconclusive and not enforceable in India.
  
  Maganbhai Chhotubhai Patel v. Maniben

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.