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ENFORCEMENT OF FOREIGN JUDGMENTS IN INDIA

Author: Business Law Chamber |

Article by Business Law Chamber

Introduction

In the Era of globalization, our Indian legal system is frequently appreciated for the importance it gives to enforcement of foreign decrees and judgment. Foreign judgments are recognized as per bilateral or multilateral treaties or conventions. This recognition happens when the court of one country accepts a judicial decision made by the courts of another foreign country, and issues a judgment in alike terms without rehearing the matter of the original lawsuit. The original judgment will only be denied if that judgment is not consistent with the basic fundamental principles of the recognizing country.

The Indian Code of Civil Procedure, 1908 (CPC) governs the execution of decrees, whether foreign or domestic, in India.

  • Section 2(6) of the CPC, defines foreign judgment as the judgment of a foreign Court, which refers to a Court situated outside India and not established or continued by the authority of the Central Government of India
  • Section 2(5) of the CPC defines foreign Court means a Court situate outside India and not established or continued by the authority of the Central Government.

As per the Central Government Notifications Nos. 47 to 51, dated the 25thFebruary, 1953, and 1st March, 1953,1 respectively, published in the official gazette the Superior Courts of all the reciprocating country have been defined. Thus any judgment from these defined courts can be further executed in India in the District Courts and will be treated as passed by domestic Indian courts. Reciprocity is an instrument by way of which one country recognizes the rules and regulations of the other country and executes the other state’s decree as if it were passed by its own courts. Thus, instead of litigating in two countries, one can get an order passed by a court in one and then execute it in the courts of other.

Section 13, Section 14 and Section 44 of CPC are related to enforcement of foreign decrees in India. 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. As per section 13 of CPC irrespective a decree being from a reciprocating or a non-reciprocating territory, if it falls under the limitations provided by Section 13 of the CPC, it will not regarded as conclusive decree. The limitations specified by section 13 of CPC are stated below:

“Section 13 When foreign judgment not conclusive.- 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 recognize 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.”

Enforcement Of Foreign Judgments In India

Enforcement of foreign judgments in India depends whether they are passed by reciprocating2 or non-reciprocating countries. The party seeking enforcement of a decree of a court in a reciprocating country is required to file execution proceedings as per section 44A of CPC, which, provides that where a certified copy of a decree passed by any of the Superior Courts in reciprocating territories has been executed in India as if passed by the District Court. In case of non-reciprocating country the party has to file a fresh civil suit on that foreign decree, or on the original underlying cause of action, or both in an Indian court of competent jurisdiction and the burden to prove that the foreign decree satisfies the conditions prescribed in section 13 of CPC is on the person looking for execution and this decree will be treated as another piece of evidence against the defendant.3 The time limit for filing a suit for enforcement for such foreign judgments is three (3) years from such judgment being delivered. A foreign judgment which falls under any of the clauses provided under Section 13(a) to (f) is inconclusive and thus not enforceable. Whenever the party applies for the execution or challenges any foreign court’s decree the Indian court will always assume that the decree was passed by a competent court having proper jurisdiction and followed the principles of natural justice until otherwise proved.

“Thus, in suits where the decree pertains to a country that is not a reciprocating territory to India, a fresh suit will have to be filed in India on the basis of such a decree or judgment, which may be construed as a cause of action for the said suit. In the fresh suit, the said decree will be treated as an additional piece of evidence against the defendant. This is time consuming and adds substantially to costs.”4

In case of a decree from a non-reciprocating foreign territory, the decree-holder should file, in a domestic Indian court of competent jurisdiction, a suit on that foreign decree or on the original, underlying cause of action, or both.5 However, in both the cases, the decree has to pass the test of Section 13 CPC which specifies certain exceptions under which the foreign judgment becomes inconclusive and is therefore not executable or enforceable in India. Judgments from "nonreciprocating territories," such as the United States, can be enforced only by filing a law suit in an Indian Court for a Judgment based on the foreign judgment. The foreign judgment is considered evidentiary. The time limit to file such a law suit in India is within three years of the foreign judgment.6

However, CPC does not permit direct enforcement from non-reciprocating countries without filling of a new suit in which the foreign judgment only has evidentiary value.

Enforcement of Foreign awards

India is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (New York Convention) as well as the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 (Geneva Convention). If a party receives a binding award from a country which is a signatory to the New York Convention or the Geneva Convention and the award is made in a territory which has been notified as a convention country by India, the award would then be enforceable in India. Out of the 196 countries in the world only 48 countries have been notified by the Central Government as reciprocating countries, with the most recent addition being Mauritius.7 The enforcement of a foreign award in India is a two-stage process which is initiated by filing an execution petition.

Conditions for enforcement of arbitral awards – domestic and foreign

A party may resort to the following grounds for challenging an award. Such an award would be rendered unenforceable when:

  • The parties to the agreement were under some incapacity.
  • The agreement in question is not in accordance with the law to which the parties have subjected it, or under the law of the country where the award was made (especially in case of foreign awards).
  • There is a failure to give proper notice of appointment of arbitrator or arbitral proceedings.
  • Award is ultra vires the agreement or submission to arbitration.
  • Award contains decisions on matters beyond the scope of submission to arbitration.
  • Composition of the arbitral authority or the arbitral procedure is ultra vires agreement.
  • Award is not in accordance with the law of the country where the arbitration took place.
  • The award (specifically a foreign 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, or under the law of which that award was made.
  • Subject matter of the dispute is not capable of settlement by arbitration under Indian law.
  • Enforcement of the award would be contrary to the public policy of India.

Enforcement under the New York Convention

Sections 44 to 52 of the Arbitration and Conciliation (Amendment) Act, 2015 deals with foreign awards passed under the New York Convention.

“As per New York Convention foreign award as an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960:-

  • In pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and
  • In one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.

From the abovementioned conditions, it is clear that there are two pre-requisites for enforcement of foreign awards under the New York Convention. These are:

  • The country must be a signatory to the New York Convention.
  • The award shall be made in the territory of another contracting state which is a reciprocating territory and notified as such by the Central Government.”

Section 47 provides that the party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court (a) original award or a duly authenticated copy thereof; (b) original arbitration agreement or a duly certified copy thereof; and (c) any evidence required to establish that the award is a foreign award. As per the new Act, the application for enforcement of a foreign award will now only lie to High Court.8 Thus, the Amendment Act has restricted the ambit of violation of public policy for international commercial arbitration to only include those awards that are: (i) affected by fraud or corruption, (ii) in contravention with the fundamental policy of Indian law, or (iii) conflict with the notions of morality or justice.

Sections 53-60 of the Arbitration and Conciliation (Amendment) Act, 2015 contains provisions relating to foreign awards passed under the Geneva Convention.

“As per the Geneva Convention, foreign award means an arbitral award on differences relating to matters considered as commercial under the law in force in India made after the 28th day of July, 1924,-

  • in pursuance of an agreement for arbitration to which the Protocol set forth in the Second Schedule applies, and
  • between persons of whom one is subject to the jurisdiction of some one of such Powers as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be parties to the Convention set forth in the Third Schedule, and of whom the other is subject to the jurisdiction of some other of the Powers aforesaid, and
  • in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, by like notification, declare to be territories to which the said Convention applies, and for the purposes of this Chapter, an award shall not be deemed to be final if any proceedings for the purpose of contesting the validity of the award are pending in any country in which it was made.“

Section 56 provides that the party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court (a) original award or a duly authenticated copy thereof; (b) evidence proving that the award has become final and (c) evidence to prove that the award has been made in pursuance of a submission to arbitration which is valid under the law applicable thereto and that the award has been made by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure. As per the new Act, the application for enforcement of a foreign award will now only lie to High Court.

“The Supreme Court interpreted provisions regarding execution of awards under the Arbitration and Conciliation Act, 1996 vis-à-vis the power of fora other than civil courts to execute particular remedies under arbitral awards. The Supreme Court has confirmed that an arbitral award for transmission of shares can be executed before the NCLT rather than the civil court by seeking rectification of register of members of a company to effectuate the transmission. The Supreme Court has further clarified that an arbitral award can be enforced against a party who was not originally a signatory to the arbitration in certain situations but constituted a person/entity claiming through or under a party, for the purpose of execution of a decree.”9

Conclusion

The concept of reciprocation has made things more complicated and indecisive, making it difficult for both the foreign and Indian courts in executing and enforcing decrees and other judicial documents. Indian Government has dismayed the Code of Civil Procedure with unnecessary provision and requirements. Thus non-recognition of foreign territory as a reciprocating country has led to failure of escalating the orders and judgments passed by its courts even if it meets the parameters of defined under Section 13. Reservation from the Hague Convention and the policy of reciprocity has widely shown its impact on the service of judicial and extra-judicial document to the people residing in India. The Indian Government must ensure that certain amendments are made on these fronts such that execution and enforcing of foreign decrees and documents can be smoother, more cost-effective and less time consuming.