India: Reciprocal relationships

Author: | Published: 27 Sep 2016
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Krishnayan Sen and Ankit Jain of Verus Advocates chart the evolution of the process for recognising and enforcing foreign judgments in India

Issues pertaining to the recognition and enforcement of judgments are typically not matters of much concern when they arise and are dealt with in a country's domestic sphere. However, the issue assumes paramount importance where a party seeks to enforce any such judgment or decree in an overseas jurisdiction. Although principles of international comity have augmented issues pertaining to the enforcement of foreign judgments, the moment a judgment or decree transcends the realm of the sovereign, its fate becomes uncertain. Its enforcement is fraught with delicate problems such as reciprocity and competence of foreign court.

India has not ratified any international treaty on the recognition and enforcement of foreign judgments. Therefore, in India such matters are dealt with under the provisions of the Code of Civil Procedure 1908 (the Code). However, India has entered into reciprocal foreign judgment recognition and enforcement treaties with various countries. These countries have been notified under the Code for the purposes of the recognition and enforcement of foreign judgments. They are: the UK; Aden; Fiji; Singapore; the United Arab Emirates; Malaya, Trinidad and Tobago; New Zealand, the Cook Islands (including Niue) and the Trust Territories of Western Samoa; Hong Kong; Papua and New Guinea; and Bangladesh. Judgments rendered by the courts in these reciprocating countries can be enforced directly by the courts in India, so long as the minimal statutory requirements as prescribed under the Code are met.

The term foreign judgment is defined under the Code as a judgment rendered by a foreign court. That is, a court situated outside India that has no authority in India and is not established or continued by the President of the Indian Union.

Recognition of foreign judgments

The Code regulates the recognition and enforcement of foreign judgments in India. It lays down that a foreign judgment will be conclusive as to any matter directly adjudicated upon between the same parties or parties under whom they or any of them claim litigating under the same title. Exceptions are where:

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

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

(iii) it appears 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;

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

(v) it has been obtained by fraud;

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

It further creates a rebuttable presumption in favour of the competence of the court rendering a foreign judgment if a certified copy of the judgment is placed before the courts in India.

Final and conclusive

For a foreign judgment to be a valid cause of action for a suit in India, it must be final and conclusive in the court in which it has been rendered. In considering whether a judgment of a foreign court is conclusive or not, the courts in India will not inquire whether its conclusions are supported by evidence, or are otherwise correct. The binding character of the foreign judgment under the Code may only be displaced by establishing that the case falls within one or more of the six circumstances prescribed under the Code, as above. The Code enacts a branch of the rule of res judicata in its relation to foreign judgments whereby a foreign judgment is conclusive as to any matter directly adjudicated upon but does not include the reasons for the judgment given by the foreign court. Therefore, not every issue finally heard and decided in a foreign court is conclusive between the parties. What is conclusive is the judgment.

Court of competent jurisdiction

The most common ground for challenging the enforceability of a foreign judgment in India is jurisdiction. For a foreign judgment to be conclusive and enforceable, it must be rendered by a court of competent jurisdiction whose competence has been ascertained in accordance with the principles of international law. A foreign court has jurisdiction to deliver a judgment in rem. This may be enforced or recognised by the courts in India provided the subject-matter of the action is a property, movable or immovable, within the foreign country. However, courts generally impose a threefold restriction upon the exercise of their jurisdiction:

(i) jurisdiction in rem by a court over res will not be exercised as other courts will not recognise it;

(ii) a court will not deal directly with the title to immovable property outside the jurisdiction of the state from which it derives its authority; and

(iii) a court will not assist in enforcement of foreign penal or revenue laws within its jurisdiction.

In actions in personam, a foreign court can be considered a court of competent jurisdiction where:

(i) the party is a subject of the foreign country in which judgments have been obtained against them on prior occasions;

(ii) the party is a resident of the foreign country at the time of the commencement of the court action;

(iii) the party has selected the foreign court/jurisdiction as the forum for taking legal action in the capacity of a plaintiff, in which forum they are sued later;

(iv) the party on summons has voluntarily appeared before the foreign court;

(v) by an agreement a person has contracted to submit themselves to the forum in which the judgment is obtained.

Judgment on merits

For a foreign judgment to be enforceable under the Code, it should have been given on merits. The burden to prove that a foreign judgment has not been rendered on merits rests with the party asserting the claim. The real test is whether the judgment was merely formally passed, as a matter of course, or by way of penalty, or based upon a consideration of the truth or otherwise of the plaintiff's claim. The court must have applied its mind to that matter and considered the evidence made available to it in order that it may be said that there has been adjudication upon the merits of the case. The following judgments have been held not to have been delivered on merits:

  • when the suit is dismissed for default of appearance of the plaintiff;
  • when the suit is dismissed for non-production of the document by the plaintiff even before the defendant filed the written statement;
  • where the decree was passed in consequence of default of defendant in furnishing security, or after refusing leave to defend.

It cannot, however, be said that a decision on the merits is only possible in cases where the defendant enters appearance and contests the plaintiff's claim. An ex parte judgment in favour of the plaintiff may be deemed to be a judgement given on merits if some evidence is adduced on behalf of the plaintiffs and the judgement, however brief, is based on a consideration of that evidence. Where, however, no evidence is adduced on the plaintiffs' side and his or her suit is declared merely because of the absence of the defendant either by way of penalty or in a formal manner, the judgement is not one based on merits.

Enforcement of foreign judgments

For the purposes of enforcement under the Code, foreign decrees under Indian law are classified into two broad categories, namely: decrees from reciprocating territory and decrees from non-reciprocating territories. Decrees from territories which the central government has notified as reciprocating under the provisions of the Code are decrees from reciprocating territory. All other decrees are decrees from non-reciprocating territories.

Reciprocal enforcement of foreign decrees

The Code provides for reciprocal enforcement of foreign judgments of foreign countries which have a reciprocal arrangement with India and have been notified by the central government under the Code. These decrees have been made enforceable as if they were decrees of Indian courts. Whenever execution of any such decree is sought, it is necessary that a certified copy of the foreign decree is filed with the court along with the certificate as to the extent to which the decree has been satisfied or adjusted.

"The moment a judgment transcends the realm of the sovereign, its fate becomes uncertain"

The Limitation Act 1963 prescribes the time limit for executing a decree and for filing a suit in the case of a foreign judgment. The Act prescribes the following time period for the execution of decrees:

(i) three years in the case of a decree granting a mandatory injunction commencing from the date of the decree or where a date is fixed for performance; and

(ii) 12 years for execution of any other decree commencing from the date when the decree becomes enforceable or where the decree directs any payment of money or delivery of property to be made at a certain date or in a recurring period, when default in making the payment or delivery in respect of which execution is sought, takes place (provided that an application for the enforcement or execution of a decree granting a perpetual injunction is not subject to any period of limitation).

Instituting a suit on foreign judgments

In the case of a decree obtained from a non-reciprocating foreign territory, a party must file a fresh civil action (suit) on that foreign decree in a domestic Indian court of competent jurisdiction. The burden to show that the foreign decree satisfies the tests prescribed under the Code is on the person seeking execution. But once the person seeking execution satisfies the court that the parameters of section 13 of the CPC are met, it is not possible to examine the sufficiency of evidence on its merits before the foreign court, or to test the correctness of the decision. The limitation for filing a suit upon a foreign judgment is three years.

Alternatively, a party can also sue in the domestic court upon the original cause of action despite the foreign judgment. The original cause of action is not extinguished nor does the foreign judgment involve the merger of it. But if the plaintiff chooses to sue upon the judgment, they cannot find jurisdiction on the basis of the original cause of action even though it may not have merged in the judgment.

Enforcement of foreign awards

A foreign award cannot be equated to a foreign judgment given by a foreign court and its validity is not open to attack on the grounds mentioned under the Code. Enforcement and execution of foreign awards in India are governed by the Arbitration and Conciliation Act 1996 (the Act), along with the provisions of the Code. While the former lays down the substantive law governing the enforceability and execution of an award, the latter deals with the procedures required to be followed when seeking the execution of an award. A party seeking enforcement of a New York Convention Award may prefer an application before the concerned High Court along with:

(i) the original/ duly authenticated copy of the award;

(ii) the original/ duly certified copy of the arbitration agreement; and

(iii) necessary evidence to establish that the award sought to be enforced is a foreign award. For a foreign arbitral award to be enforceable in India under the Act, it should have been rendered in a convention country in relation to a commercial dispute and rendered pursuant to a written and valid/enforceable commercial agreement. It should also be free from any ambiguity.

The Act further lays down the conditions under which an Indian court may refuse to enforce a foreign arbitral award rendered under the New York Convention. These are where:

(i) a party to the award was under some incapacity or the agreement is invalid;

(ii) the party against whom the award is sought to be enforced was not given proper notice of the appointment of the arbitrator or was not given an opportunity to present their case;

(iii) the award contains a decision beyond the scope of the arbitration agreement;

(iv) the composition of arbitral authority or arbitral procedure was not in accordance with the agreement; or

(v) the award has been set aside by the competent authority of the country in which, or under the laws of which, the award was made.

The Act lays down that enforcement of a foreign award may also be refused by a court where the subject-matter of such award is not capable of settlement by arbitration under Indian law, or where its enforcement would be contrary to public policy.

"India has not ratified any international treaty on the recognition and enforcement of foreign judgments"

Challenging the enforcement of a foreign arbitral award on the ground of public policy has been the subject of much debate and judicial scrutiny over the years. In ONGC vs. Saw Pipes (2003), the Hon'ble Apex while interpreting the term public policy under the Act, had liberally construed the term, assigning it a comprehensive and much wider meaning under the Act. However, through its later judgments, while discerning the view taken in ONGC vs. Saw Pipes and with a view to foster a pro-arbitration regime and further the Act's objectives, the court has whittled down the meaning of the term and laid down the thresholds that would define the terms public policy in relation to the enforcement of foreign awards in India (Shri Lal Mahal, 2013).

This view has also found favour with the legislature which, in 2015, amended the provisions of the Act in this respect. A foreign award under the Act, for the purposes of enforcement, will now only be considered to be in conflict with the fundamental policy of India where:

(i) the making of an award has been induced by fraud or corruption;

(ii) the award contravenes the fundamental policy of Indian law; or

(iii) it conflicts with the most basic notions of morality or justice.

No separate application is envisaged under the Act for the purposes of executing a foreign award. The application preferred by a party to the award for the purposes of its enforcement undergoes a two stage process. Once the statutory conditions are met, a foreign award is deemed to be a decree passed by an Indian court and is enforceable by the Indian courts having jurisdiction for the purposes of execution of such a decree. The court shall thereafter proceed to take steps for its execution in a manner similar to the process of execution of a domestic award.

The way forward

The law governing the recognition and enforcement of foreign awards in India has progressed and evolved over the years. It is getting increasingly articulate and catching up with the international trends, with the courts taking a pragmatic view on various issues pertaining to enforcement and recognition. However, there is still a need to streamline the process of recognition and enforcement for foreign judgments. This would do away with the enigmatic patchwork of statutory schemes and, instead, evolve a uniform scheme that favours the liberal enforcement of judgments by lowering the thresholds for recognition and limiting the grounds for posing defences to such enforcement. The dichotomy created by the disparity in procedures for enforcing foreign judgments with respect to reciprocating and non-reciprocating countries needs to be removed and the process needs to be made more expeditious. The present scheme of enforcement of foreign judgments, by affording multiple opportunities to the unsuccessful party to file its objections, makes the process of enforcing a foreign judgment a time-consuming and a lengthy process. This substantially escalates the legal costs and gives the unsuccessful party ample opportunity to dissipate its assets, rendering a decree a mere paper award. India needs to put in place cost and time-effective solutions for enforcement of such judgments. This would give the necessary momentum for their effective and expeditious enforcement and foster and inspire the much-needed investor confidence in the Indian judicial process.

About the author

Krishnayan Sen
Partner, Verus

New Delhi, India
T: +91 11 26215601
F: +91 11 26215603

Krishnayan Sen is a partner at Verus and heads the firm's disputes practice. He has been a trusted adviser to a diverse range of clients, including international corporations, government undertakings, banks and statutory authorities. He is a versatile litigator, having regularly represented clients across different courts and tribunals. He is also an advocate-on-record at the Supreme Court of India and has appeared in several leading cases.

His recent cases include successfully representing United Bank of India against Kingfisher Airlines and Vijay Mallya at the Supreme Court of India in recovering its dues of $60 million (awarded deal of the year by the India Business Law Journal); successfully defending McDonald's in relation to the accounting method of rounding-off followed in its chain of restaurants; advising Schlumberger in a public procurement tender of around $35 million; advising UBER in actions for defamation against a regional media house; successfully representing Huntsman International in recovering its contractual claims against a vendor before the Delhi High Court; advising GE Healthcare in an arbitration involving a claim for personal damages and advising Kotak Mahindra Bank in defending secured creditor's rights under the Securitisation Act before the Supreme Court.

His principal areas of practice include international arbitration, corporate-commercial disputes and banking litigation. He is fluent in English, Hindi and Bengali.

About the author

Ankit Jain
Associate, Verus

New Delhi, India
T: +91 11 26215601
F: +91 11 26215603

Ankit Jain is an associate at Verus and is part of the firm's disputes practice group in New Delhi. A graduate from the University of Petroleum and Energy Studies, Dehradun, Jain focuses on civil and commercial litigation, oil & gas, mining and arbitration. He regularly represents clients across different courts and tribunals and advises them on a wide array of legal issues.

His recent representations include advising and representing a leading global oilfield services provider in a dispute pertaining to the award of an offshore oilfield services contract before the Supreme Court; advising and representing a leading public sector undertaking before the antitrust regulator in a matter pertaining to bid rigging in a public procurement tender; representing a leading public sector bank before the Board for Industrial and Financial Reconstruction and representing a multinational corporation in an international commercial arbitration pertaining to a services and supply contract.

He is fluent in English and Hindi.


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