India and the United Arab Emirates (“UAE”) have had strong diplomatic and trade relations since decades. At the 13th Session of the “India-UAE Joint Commission Meeting on Trade, Economic and Technical Cooperation” held on August 17, 2020, representatives from both India and UAE expressed optimism over the growing trade, economic and investment cooperation between the two countries. While both the countries are optimistic about growth in trade relations, the Indian Government in the beginning of 2020, took commendable steps to facilitate cross border trade by declaring UAE as a reciprocating territory for execution of foreign judgments in India under Section 44A of the Civil Procedure Code, 1908 (“CPC”). The same was done by way of an Extraordinary Gazette Notification No. 36 of 2020, issued by the Ministry of Law and Justice on January 17, 2020.
The discussions around this change started when India entered into a bilateral agreement with UAE in October 1999, i.e. “Agreement on Juridical and Judicial Cooperation in Civil and Commercial Matters for the Service of Summons, Judicial Documents, Judicial Commissions, Execution of Judgments and Arbitral Awards” to bolster cooperation between the states, and implement enforcement rules. However, India gave limited effect to the agreement and restricted it to summons and other judicial processes.
Apart from UAE, the other countries that have already been declared as “Reciprocating Territories” are the United Kingdom, Singapore, Bangladesh, Malaysia, Trinidad & Tobago, New Zealand, the Cook Islands (including Niue) and the Trust Territories of Western Samoa, Hong Kong, Papua New Guinea, Fiji, Aden under Section 44A of CPC.
II. Relevance of Section 44A of the CPC
A decree in India, either foreign or domestic, based on the principle of territorial sovereignty, shall have to be enforced as per the civil procedure of the country. It is settled that a judgment delivered in one country, in the absence of any international arrangement, cannot have a direct operation of its own in another country. Section 44A of the CPC therefore has an important international role to play.
Section 44A of CPC was inserted by Section 2 of the Civil Procedure Code (Amendment) Act, 1937, to give effect to the policy contained in the Foreign Judgments (Reciprocal Enforcement) Act, 1933, conferring an independent right on a foreign decree-holder for enforcement of a decree/order in India. The term “Reciprocating territory” under the said section means any country or territory outside India, which the Central Government of India may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of this section.
Section 44A (1) provides that a decree passed by “a superior Court” in any “reciprocating territory” can be executed in India by filing a certified copy of the decree in a District Court, which will treat the decree as if it has been passed by the District Court of India itself. According to Explanation 2 under the said section, the scope of the section is restricted to decrees for payment of money, not being sums payable “in respect of taxes or other charges of a like nature or in respect of a fine or other penalty and cannot be based on an arbitration award, even if such an award is enforceable as a decree or judgment”
III. The Concept of Reciprocating Territory and Superior Courts
Reciprocating countries means any country or territory outside India, which the central government may by notification in the official gazette (where UAE has been added vide the Gazette Notification), declare to be a reciprocating country and “Superior Courts” with any such territory means such courts as may be specified in the said notification. According to the Gazette notification, the following UAE courts have been identified as ‘Superior Courts’:
- Federal Court-
- Federal Supreme Court;
- Federal, First Instance and Appeals Courts in the Emirates of Abu Dhabi; and
- Sharjah, Ajman, Umm Al Quwain and Fujairah.
- Local Courts-
- Abu Dhabi Judicial Department;
- Dubai Courts;
- Ras Al Khaimah Judicial Department;
- Courts of Abu Dhabi Global Markets; and
- Courts of Dubai International Financial Center.
IV. Execution of Foreign Decrees in India
Under the CPC, direct enforceability of a foreign decree requires compliance with Sections 13, 14 and 44A of the CPC. Irrespective of the decree being reciprocating or non-reciprocating, the decree must meet with the requirements laid down under Section 13 of CPC, which states that 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 few circumstances, which have laid down under the Section 13(a) to (f) of CPC which reads as:
A foreign judgement 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 –
- where it has not been pronounced by a Court of competent jurisdiction;
- where it has not been given on the merits of the case;
- where it appears on the face of the proceedings 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;.
- where the proceedings in which the judgement was obtained are opposed to natural justice;
- where it has been obtained by fraud;
- where it sustains a claim founded on a breach of any law in force in India.
Prior to UAE receiving the reciprocating country status, judgments passed by the UAE courts, being a non-reciprocating territory could only be enforced by filing a suit in an Indian court for a judgment based on the foreign judgment/decree. While such a foreign judgment was considered evidentiary, but was not directly executable in India. Hence, a fresh suit had to be filed in India on the basis of such a decree or judgment, which could be construed as a cause of action for the said suit.
As per Section 14 of the CPC, it is important to note that a court shall presume upon the production of any document purporting to be a certified copy of a foreign judgment, that such judgment was pronounced by a Court of competent jurisdiction, unless the contrary appears on the record; but such presumption may be displaced by proving want of jurisdiction. After complying with Sections 13, 14 and 44A of the CPC, the parties based out of UAE would now be able to execute such decrees in India, if passed by a ‘Superior Court’ as laid down in the Gazette Notification.
However, it is pertinent to note that as per the Supreme Court case in International Woollen Mills v. Standard Wool (U.K) Ltd. (2001), any decree and judgment granted by foreign court can be said to be on merits only if such court has considered the case on merits by looking into the evidence led by plaintiff and documents to prove it, as per its rules.
*Diagrammatic representation of steps to enforce a Foreign Decree passed by UAE courts
V. Impact of the Decision
The change brought forth by recognising UAE as a reciprocating territory for enforcing judgments passed by courts of UAE is being seen as yet another milestone achieved for strengthening India’s ties with UAE. It also definitely shall bring forth a sense of security for cross border disputes in UAE. Further, the said notification was a desired impetus, which was required since the past twenty (20) years to actually enforce bilateral agreement between the countries that took place in 1999.
Further, this change will facilitate recovery proceedings undertaken by banks and financial institutions in UAE against defaulting debtors. Recently, there has also been considerable amount of concern as huge amounts of money which have been lent by UAE banks to Indian entities/ individuals are sought to be recovered in India. Pursuant to recognising UAE as a reciprocating country, banking institutions in UAE will be able to take recovery actions against Indian defaulters.
The reciprocity between India and UAE for execution of decrees will also give credence to UAE decree holders to invoke the mechanism under India’s Insolvency and Bankruptcy Code, 2016, as a measure for debt realisation. Recently, the National Company Law Tribunal and its appellate body, the National Company Law Appellate Tribunal, the Tribunals have dealt with cases pertaining to initiation of insolvency proceedings against Indian entities by an entity from a reciprocating country. The process for executing decree passed by foreign courts of non-reciprocating territories is cumbersome and expensive, which now has been put to an end.
This move may further increase capital inflows and enhance the production capacity of the Indian economy. In current times, when both the Indian and the UAE economy has seen multiple hiccups due to the pandemic, the change may bring in a sense of reliance on the Indian Courts and the justice mechanism among UAE investors. The change may also play an important role in enhancing competitiveness of the domestic economy through transfer of technology, strengthening infrastructure, raising productivity and generating new employment opportunities for India.