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THE INDIAN JUDGE AND INTERNATIONAL COMMERCIAL LAW, A PRACTICAL APPROACH
NagangomJuniorLuwangPartner,CorporateLawGroupNewDelhi11001
ThenetresultisthattheCourtsinIndiaarenowatlibertytolay down and follow their own rules with regard to PrivateInternational Law and in this respect we are in a veryfortunatepositionsincewecanadopttherules laiddown invarious countries as accord best with our sense of justice,equityandgoodconscience.Wecanprofitbytheirexperienceanderrors.1
Since the opening up of Indias economy, membership of the WTO
coupled with near double digit GDP growth and consequent rapid
integrationof its economywith theglobal order, Indian Judiciaryhas
increasingly come to deal with diverse commercial issues of
transnational dimension. India being a signatory of GATT, GATS,
TRIPs, UNCITRAL, New York Convention, Paris Convention etc.,
appropriateamendmentshavebeen/arebeingmadeinIndiasdomestic
lawstoharmonizethemwithsuchInternationalstandards,keeping,of
course, domestic interest as a prime concern. In the midst of such
rapidchanges,IndianJudiciary,moreoftenthannot,findsitselfatthe
crossroad of diverse interests, faced with the daunting task of
interpreting Indias domestic laws in the light of the fast evolving
InternationalLegalStandards.
InternationalCommercialLawpersedoesnotautomaticallybecomea
lawinIndiaonitsownforcewithoutanydomesticlawlegislatedbythe
IndianParliament.InGramaphoneCompanyofIndiaLtd.Vs.Birendra
BahadurPandey&Ors,2 theSupremeCourtofIndiaheldthatNational
LawwillprevailoverInternationalLawincaseofanyconflictbetween
1I&GInvestmentTrustVs.RajaofKhalikote,A.I.R.1952Calcutta,508.2(1984),2SCC534
2
the two and in Novartis AG & Ano. Vs. Union of India & Ors.3, the
ChennaiHighCourtheldthatcourtsinIndiahavenojurisdictiontoset
asideadomesticlawongroundofviolationofanInternationalLawor
treaty,unlessthesameisreflectedinadomesticIndianLawbasedon
this premise, it was held that Article 27 of TRIPs cannot be banked
uponasabasis forchallengingSection3(d)oftheIndianPatentAct,
1970. In coming to the said conclusion, the Chennai High Court
referredtoSalomnVs.CommissionerofCustoms4,wheretheCourtof
AppealinEnglandobservedasunder:
If the terms of the legislation are clear and unambiguous,theymust begiven effect towhether or not they carry ourHer Majestys treaty obligations, for the sovereign power oftheQueeninParliamentextendstobreakingtreatiesandanyremedyforsuchabreachofaninternationalobligationliesinaforumotherthanHerMajesticownCourts.
Nevertheless, there is no bar, express or implied, disabling Indian
Courts from declaring domestic laws as violative of an International
LaworTreaty.Indeed,InternationalLawshavealwayshadpersuasive
valueonIndianCourts.Forthepurposeofthispaper,Iwilldealwith
the subject from three different perspectives (a) International
CommercialLitigation,(b)InternationalCommercialArbitrationand(c)
EnforcementofForeignJudgments.
InternationalCommercialLitigation
IndiasCivilProcedureCodeallowscourtsinIndiatotakeupanddecide
InternationalCommercialDisputes,providedthecauseofactionpartly
orwholly arises in India or the Respondent/Defendant resides/carries
onbusinessinIndiaorwherethePartiestoaContractagreeonIndia
asthechosenJurisdiction.Rightfromantidumping,lettersofcreditto
3JudgmentdatedAugust6,2007inW.P.Nos.24759/2006&24750/2005419663,AllEnglandLawReports,Page871
3
wellknown International brandnames,courts in Indiahavedelivered
JudgmentswithWTO&otherInternationalcommerciallawswellwithin
theirzoneofconsideration.Whereverestablishedlaworprecedentsare
silent or not clear, Courts in India rely on relevant foreign laws,
Judgments and International Covenant not only for purposes of
interpretation but also for determination of legal rights. Five High
Courts in India with original jurisdiction including Delhi and Mumbai
HighCourtshavebeenmoreparticularlyactiveindisposingcommercial
mattersoftransnationaldimension.
However, delayhasbeen a concern for the LawCommissionof India
andtheGovt.ofIndia.Suchadelay inJudicialproceedingshasbeen
discouragingforeignplayersfrominvokingIndianJurisdictionsomuch
soevenwhereIndianjurisdictionasanalternativeispossible,courtsin
other jurisdictionshaveassumed Jurisdictionwith delay furnishedas
anostensiblereason.Nothingcouldbeclearerthantheobservationof
theLawCommissionofIndiainitsReportsubmittedin2003:
Indeed, there areseriousanomalies in the approachof theUSandUKCourtsontheapplicationoftheprincipleofForumnonconveniens.AparticularcontrastintheapproachoftheforeigncourtstowardsIndianPlaintiffsasdistinguishedfromforeign plaintiff, needs to be referred to. Mostly, if thedefendantsarealiens,thentheseforeignCourtstakeupthecases immediately on the ground of delay of courts in thecountry of the alien. If the alien is the plaintiff, the samecourtsrelegatethePlaintifftotheCourtsinthecountryoftheAlien.
Initsreport,theLawCommissionofIndiahascomedownharshlyon
CourtsinforeignjurisdictionsresortingtoForumNonConveniensasa
convenientexcusetoassumejurisdictioninmatters,whichcouldhave
beentriedinIndia.TheLawCommissionhasreferredtoanunexpected
praise for the Indian Judiciary by Judge Keenan of the US District
Court, South District of New York, while dismissing claims of Indian
4
Plaintiffs and relegating the victims of the infamous Bhopal Gas
Tragedy to Indian Courts in Re Union Carbide Corporation Gas Plant
Disaster at Bhopal5, while in Bhatnagar Vs. Surendra Overseas
Limited6, the 3rd Circuit Court of Appeal of US gave judicial delay in
India which could go upto a quarter of a century as its ostensible
reason for assuming its jurisdiction in thematter. Nevertheless, the
LawCommissionofIndiahasnotlostsightoftheproverbialNoSmoke
WithoutFireandhasaccordinglyrecommendedCommercialDivisions
intheHighCourtstoavoiddelay,somuchassociatedwiththeIndian
Judicialsystem.
InternationalCommercialArbitration
AsinotherJurisdictions,InternationalCommercialArbitrationadhoc
as well as institutional is gaining popularity in India as well. Just as
most domestic arbitrations in India are adhoc, most International
Commercial Arbitrations in India are Institutional thanks to such
Arbitration Bodies in India like Indian Council of Arbitration (ICA),
IndianCouncilforAlternateDisputeResolution(ICADR)etc
ThepresentIndianArbitrationandConciliationAct,1996,basedonthe
UNCITRALmodel,haselaborateprovisionsonInternationalCommercial
Arbitration adhoc as well as Institutional held in or outside India.
UndertheschemeoftheAct,ArbitralAwardsareenforceableasifsuch
awardsweretheorderspassedbytheCourtsinIndia.Thealmost90%
finality of such Arbitral Awards is reflected in Section 34, which
providesverylimitedtechnicalgroundsforchallengingArbitralAwards.
Though theSupremeCourtofIndia inONGCLtd.Vs.SawPipesLtd.7
has enlarged the scope of Public Policy as a ground for challenging
5 (1986)634,F.Suppl842(S.D.N.Y.)6 (1995)52F.2.d.1220(3rdCir.)7(2003)5SCC705
5
ArbitralAwards,thepreviousJudgmentofalargerBenchinRenusagar
PowerCo.Ltd.Vs.GeneralElectricCo.8 wouldhaveaprevailingeffect
and hence, the position of very limited grounds for challenging
International Commercial Arbitration Awards remains more or less
unchanged.
Apart fromminimuminterferencewithArbitralAwards,courts inIndia
havealsobeenpassinginterimorderstoprotecttheinterestofforeign
partiesinassetsinIndia.InBhatiaInternationalLtd.Vs.BulkTrading,
S.A.9,theSupremeCourtofIndiaheldthatPartIoftheArbitration
andConciliationAct,1996,whichgiveseffect totheUNCITRALModel
lawandwhichconferspowerontheCourttogrant interimmeasures,
appliedeventoArbitrationsheldoutsideIndia.Thiscasepertainstoan
Arbitration held as per ICC Rules in Paris and it was during the
pendencyofsuchArbitrationproceedingsthattheforeignpartyapplied
to a court in India for interimmeasure for securing its interest in a
property inIndia.Though thecontentionoftheIndianPartywasthat
New York Convention does not leave any scope for grant of interim
measure/relief by aCourtother than a court of the country inwhich
Arbitrationisbeingheld,theHonbleHighCourtaswellastheSupreme
Court took a contrary view. This is one occasion where the Indian
Judiciary has been confronted with interpretation of an International
ConventionasimportantasUNCITRALanditgoestothecreditofthe
HonbleSupremethatinterimreliefshavebeenheldtobepermissible
underthesaidConventionforsecuringpropertiesinIndia,eventhough
theplaceofArbitrationisoutsideIndia.
EvenundertheoldArbitrationandConciliationAct,1940,theSupreme
Court of India had an occasion to interpret what is commercial? in
81994Supp(I)SCC6449(2002)4SCC105
6
R.M. Investments V. Boeing Company10. In this Judgment, the
SupremeCourttookguidancefromUNCITRALingivingawidemeaning
to the expression commercial so as to include all relationships of a
commercial nature, whether contractual or not, for the purpose of
InternationalCommercialArbitration.
As regards enforcement, the enforcement procedure applicable to
Foreign Judgments is more or less applicable to International
Commercial Arbitration Awards, which takes us to the next issue of
enforcementofForeignJudgmentsinIndia.
EnforcementofForeignJudgmentsandArbitralAwards:
UnderSections13and44AoftheCivilProcedureCode(CPC),Foreign
Judgments can be enforced in two different ways, depending on
whetherthecountryinwhichtheForeignJudgmentispassedislocated
isaReciprocalCountryornot.Whileanorderpassedbyacourtina
socalled reciprocalcountrycanbestraightwayenforced in Indiaas if
thesameisadecreepassedbyacourtinIndia,anOrderpassedbya
Court in a nonreciprocating country can only be enforcedby filing a
fresh suit on the basis of such an Order. Government of India has
notified some countries including Singapore and Hong Kong as
ReciprocatingTerritories.However,asperSection13of theCPC, all
ForeignJudgments,tobeenforceable,shouldhavebeenpronouncedby
a court of competent jurisdiction onmerit, should not be violative of
Natural Justice, should not have been obtained by fraud, should not
sustain a claim founded on a breach of a law in force in India and
shouldnothavebeenpassedbyrefusingtorecognizethelawofIndia
incasessuchlawisapplicable.More importantly,aForeignJudgment
which is founded on an incorrect view of International Law is not
enforceableinIndia.
10AIR1994SC1136
7
ThemostcontestedissueonForeignJudgmentinIndiaistheissueof
Jurisdiction.TheSupremeCourtofIndiaandHighCourtshavetakena
pragmatic stand on this issue. In many cases, the defence against
enforcement of Foreign Judgments in India is to question theForeign
Courts jurisdiction on the ground that the Party has not submitted
itselftothejurisdictionoftheForeignCourt.InAndhraBankltd.Vs.R.
Srinivasan11, a Suit was filed against a guarantor in a foreign
jurisdiction but during the pendency of the proceedings, the
guarantor/defendant died and the legal representatives of the
Guarantorwerebroughtonrecord.Afterthedecreewassoughttobe
executed, thedefenceof the legalRepresentativeswas that theyhad
not submitted to the jurisdiction of the Foreign Court. However, the
SupremeCourtofIndiaheldthatthematerialtimewhenthetestofthe
ruleof Private International Law is tobeapplied is the timeatwhich
theSuitwasinstituted.
InShalingRamVs. FirmDaulatramKundanmal12, theSupremeCourt
heldthatfilingofanApplicationforleavetodefendasuitinaforeign
courtamountstovoluntarysubmissiontothejurisdictionoftheForeign
Court.Infact,waybackin1914, inRamanathanChettiarV.Kalimuthu
Pillai,13,theMadrasHighCourtstipulatedthecircumstancesinwhicha
Party to a dispute can be said to have submitted himself to the
jurisdictionofaForeignCourtJudgment:
(a). Where the Party is a subject of the Foreign Country in which
Judgmentshavebeenobtainedagainsthimonprioroccasions.
(b).WherethePartyisaresidentoftheforeigncountryatthetimeof
thecommencementofCourtaction.
11AIR,1962SC23212AIR1967SC73913AIR1914Madras556
8
(c).WherethePartyhasselectedtheForeignCourt/Jurisdictionasthe
forum for taking legal action in the capacity of a Plaintiff, in which
forumheissuedlater.
(d).Where thePartyonsummonshasvoluntarilyappearedbefore the
ForeignCourt.
(e).WherebyanAgreementapersonhascontractedtosubmithimself
totheforuminwhichtheJudgmentisobtained.
The above principles are more or less still followed for determining
jurisdictionofForeignCourts.
Apart from the Jurisdiction aspect, it is also required that a Foreign
Judgment, to be enforceable, should have been passed onmerit and
after appreciating all the relevant facts and circumstances. In Abdul
Rahmanv.Mohd.AliRowther14 ,thefullBenchoftheHonbleSupreme
Courtobservedasunder:
'AdecisiononthemeritsinvolvestheapplicationofthemindoftheCourtto the truthorfalsityoftheplaintiff's caseandtherefore though a judgment passed after a judicialconsideration of the matter by taking evidence may be adecision on the merits even though passed ex parte, adecisionpassedwithoutevidenceofanykindbutpassedonlyon his pleadings cannot be held to be a decision on themerits.'
This full Judgment still holds the field, followed later in International
WoollenMillsV.StandardWool(U.K.)Limited15inwhichtheSupreme
Court of India did not accept the view that a decree passed in the
absenceofthedefendantisadecreeonmeritsorthepropositionthat
thedecreewasonmeritssimplybecausealldocumentsandparticulars
hadbeenendorsedwiththestatementofclaim.
141928AIR(Rang)319:ILR6Rang552,152001(5)SCC265,
9
InY.NarsimhaRaoVs.Y.VenkataLakshmi16,theSupremeCourtheld
that aForeign Judgment tobe enforceable in India shouldhavebeen
passedonmerit,whichmeansthatthedecisionshouldbetheresultof
acontestbetweenthepartiesandthisrequirementisfulfilledwhenthe
Respondent is duly served and he voluntarily submits himself to the
jurisdiction of the Foreign Court. Thus, for a Foreign Judgment to be
enforceable in India, the Judgment should preferably benot exparte
andthemattershouldhavebeenheardonmerit.
Section 13 of the Indian Civil Procedure Code also clearly stipulates
thatForeignJudgment,tobeenforceable,shouldnothavebeenpassed
based on an incorrect reading or understanding of an applicable
InternationalLaworthereshouldbeanyrefusaltorecognizethelawof
India in case inwhich such law is applicable.Wayback in1934, the
HighCourtofMadras in Panchapakesha Iyer&Ors.Vs.K.N.Hussain
MuhammadRowther&Ano.17 refusedtoallowanOrderpassedbythe
SupremeCourtof Penangon the ground that the Judgment isnot in
consonancewithInternationalLaw:
In doing that I think it is clear that he has adopted anincorrectviewofinternationallawinregardtothejurisdictionofacourtofonecountryoverimmovablepropertysituateinanothercountryandforthispurposetheCrowncolonyoftheStraits Settlements and British India must be regarded asseparatecountries.Thismistakeispatentonthefaceoftheproceedingsandinthatregardthee isinmyopinionacleardefectinthejudgmentoftheSupremeCourtwhichmakesitnotonewhichthePlaintiffcansueinaCourtinthiscountry.
In I&G Investment TrustVs.RajaofKhalikote (Supra), theHonble
HighCourtrejectedenforceabilityofaJudgmentpassedbyanEnglish
Courtbyholdingasunder:
16(1991)3SCC45117A.I.R.1934Madras145
10
In certain circumstances, the English Courts have bystatutory provision, assumed jurisdiction over nonresidentforeigners. Inso far as such AssumedJurisdictionmilitatesagainsttheprinciplesofPrivateInternationalLawacceptableto India, she cannot be held bound by the same. SuchJudgmentsareperfectlyvalidwithinthemunicipaljurisdictionwhere they are propounded but have no internationalvalidity.
Thus,thoughaInternationalCommercialLawdoesnotbecomealawin
IndiaonitsownforcewithoutanydomesticlawlegislatedbytheGovt.
ofIndia,theCivilProcedureCodeofIndiaprovidesincorrectreadingof
InternationalLawasagroundfornonenforcementofForeignAwards
in India. This speaks volumes of how important International
Commercial Law has been for the Courts in India in evolving
commerciallawinIndia.
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