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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

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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

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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

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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

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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

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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

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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

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(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,

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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

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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.