INTRODUCTION
In the dynamic and rapidly evolving global marketplace, particularly in fast-growing economies like India, there are ever-growing commercial transactions amongst entities within India as well as international transactions amongst entities within India and outside of India. Additionally, what once appeared to be a herculean task has now become seamless as with a mere click of a button, individuals and corporations can seamlessly connect with counterparts across the globe and engage in business transactions. Consequently, the volume of international transactions has surged, leading to a corresponding increase in the number of disputes arising from these transactions.
These commercial transactions are often in back-to-back arrangements or interlinked with other commercial transactions with other entities and any disruption in one transaction can affect other transactions as well; delay in recovery of money will also affect liquidity and credit cycle having cascading effects on business.
In our article titled “Efficient Strategies for Expeditious Recovery of Monetary Dues in India”, we have discussed about different efficient strategies for expeditious recovery of money in India including an overview of the topic of the current article. We now seek to go into details of the same.
INDIA’S FRAMEWORK FOR RESOLVING INTERNATIONAL DISPUTES
India has implemented several mechanisms to resolve disputes arising from international transactions, including legislative reforms, adoption of international conventions, promotion of alternative dispute resolution methods, and establishment of specialized judicial infrastructure. The Reserve Bank of India (RBI) sets the rules for foreign money transfers, guided by central government tax laws, and oversees banking operations and international wire transfers under the Foreign Exchange Management Act (FEMA). This framework aims to improve trade and payment handling while supporting India’s forex market growth. With amendments in the Arbitration and Conciliation Act, of 1996(“the A&C Act”), Indian seated arbitration proceedings have become much speedier with a legislative mandate for completion of such proceedings in a span of one year from the date of completion of pleadings with s.23(4) of the A&C Act further providing for timeline of six months from the date of arbitrator/s receiving notice of their appointment. With the Advent of Commercial Courts Act, of 2015, the process of resolution of commercial disputes in India has become faster and streamlined.
Despite India’s commendable implementation of various mechanisms to resolve disputes, a foreign party may still find it advantageous to seek resolution in foreign courts for several reasons. These may include perceived impartiality and neutrality of foreign judicial systems, familiarity with the legal processes, foreign proceedings being still speedier compared to the Indian Court process.
WHO MAY CONSIDER OBTAINING DECREE IN THEIR HOME COUNTRY
The Civil Procedure Code, of 1908 distinguishes decrees from reciprocating territories and other territories.
Section 44A of the Code of Civil Procedure, 1908 (“CPC”), allows for the execution of decrees from superior courts in reciprocating territories in India. This provision ensures that a decree from a court in a reciprocating territory can be treated and executed similarly to a decree passed by an Indian court.
As against the above, a judgment from a non-reciprocating territory cannot be directly enforced in India in the same manner as a judgment from a reciprocating territory. Instead, to execute a judgment from a non-reciprocating territory, one must file a new lawsuit in any Indian court of appropriate jurisdiction. The said suit can be based on the foreign judgment itself, the original cause of action, or both. Essentially, the foreign judgment serves as evidence and has persuasive value in the new suit, rather than being directly executable. Such judgments do not result in the benefit of expediting the recovery process in light of the requirement to again file a suit in the Indian Court and even familiarity with the home country’s system is not of much advantage as it could not be directly enforced.
While we are not suggesting that foreign judgment from non-reciprocating territory is of no avail and it may have its own value depending on various facts specific factors, we do not intend to deal with that aspect at greater length in this article.
It may be however generally prudent for residents and nationals of reciprocating territories to explore the option of obtaining a judgment and decree for money recovery against an Indian entity in their home country evaluating the timeline and costs involved in obtaining such judgment time, without going in details of various facts specific factors.
Which are reciprocating Territories?
The Central Government designates the reciprocating territories through notifications in the Official Gazette. Currently, the recognised reciprocating territories include Aden, Bangladesh, the Cook Islands (including Niue), Fiji, Hong Kong, the Federation of Malaya, New Zealand, Papua New Guinea, the Republic of Singapore, Trinidad and Tobago, the Trust Territories of Western Samoa, the United Arab Emirates, and the United Kingdom.
Whether and when a resident / national of a foreign country could file a suit in the home country for recovery of money from an Indian Entity?
It may not be always possible to file a suit in the home country for recovery of money from an Indian Entity. The domestic court in the home country will determine whether it has jurisdiction to try and entertain a suit against an Indian entity based on the principles of private international law, domestic civil procedure or civil practice law/ rules and how they interpret a apply the principles of private international law. It may be possible for foreign entity to bring a suit for enforcement of a contract, recovery or monetary dues, damages etc. in its home country. While filing a suit in the home country may be possible owing to different connecting factors, full or partial cause of action or other factors, advice on these aspects could be best provided by a qualified legal practitioner in the relevant reciprocating territory and it is suggested to discuss with the legal practitioner in the home country about these issues.
Once the judgment from a reciprocating territory is obtained, what is the process for enforcement of the same in India?
As provided under Section 44A of the CPC, for enforcement of a foreign judgment from a reciprocating territory in India, the decree-holder is required to obtain and present a certified copy of the decree for execution in a District Court in India. Additionally, the decree-holder must furnish a certificate from the foreign court indicating the extent to which the decree has been satisfied or adjusted if any satisfaction has been achieved. The Indian court will then recognize this decree as if it were its own, thereby enabling the decree-holder to initiate execution proceedings.
Are there any grounds on which foreign judgment from reciprocating territory will be refused to be enforced by the Indian Court?
Refusal to enforce a foreign judgment could be for limited grounds as provided under Section 13 of the CPC. Section 13 provides that foreign judgment shall be conclusive as to any matter directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title and judgment may not be considered as conclusive only in the eventualities of (i) judgment not having been pronounced by a court of competent jurisdiction (ii) judgment not having been given on the merits of the case (iii) judgment appearing 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 (iv) judgment having been obtained opposed to natural justice (v) Judgment having been obtained by fraud and (vi) judgment sustains a claim founded on a breach of any law in force in India.
Above grounds are with a view to ensure that enforcement of foreign judgments in India aligns with the fundamental legal and ethical standards upheld by Indian courts; in practice it is extremely difficult to establish these grounds.
CONCLUSION
A foreign entity may consider carefully evaluating its circumstances, timeline, familiarity with judicial system and costs involved in deciding whether to bring a suit in India against an Indian entity or to obtain a judgment in foreign country and seek to enforce the same in India. It may be a viable and perhaps a speedier option for entities from reciprocating territories to opt for obtaining a judgment in foreign country and seeking to enforce the same in India. Ideally, any decision in this regard should be taken only after consulting both-home country and Indian legal practitioner.
* Readers should contact their attorney to obtain advice with respect to any particular legal matter. No reader or user should act or refrain from acting on the basis of information written above without first seeking legal advice from qualified law practitioner.
Author: Ravish Bhatt, Managing Partner, R & D Law Chambers LLP
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*R & D Law Chambers is a firm providing Legal advisory and International and Domestic Tax Advisory services. To know more visit https://rdlawchambers.com/