This article is authored by Akash Krishnan, a student of ICFAI Law School, Hyderabad. It discusses in detail the recent judgments of the Kerala High Court regarding the principle of reciprocating territory under Section 44A of the Code of Civil Procedure.
It is a settled principle of law that a judgment delivered in one country is neither directly binding nor enforceable in another country in the absence of an international arrangement between the countries. In India, Section 44A of the Code of Civil Procedure, 1908 envisages such an international arrangement between India and a reciprocating territory. The term ‘reciprocating territory’ has been defined under Explanation 1 to Section 44A as any country/territory outside India, which the Central Government of India may, by notification in the Official Gazette, declare to be a reciprocating territory.
Section 44A provided that any decree passed by a superior court in a reciprocating territory is executable in India by filing a certified copy of the decree in a District Court, which would treat the decree in the same manner as if it had been passed by the District Court of India itself. However, the scope of this Section is limited to decrees involving payment of money.
Agreement between India and UAE
India and the UAE entered into an Agreement on 25th October 1999 according to which both countries were to extend judicial cooperation in civil and commercial matters. This agreement included provisions w.r.t cooperation in the execution of judgments as well. However, it was only on 17th January 2020 that the Central Government declared the UAE to be a reciprocating territory under Section 44A and declared the following courts in the UAE to be superior courts of that territory, namely:
- Federal Courts:
- Federal Supreme Court.
- Federal, First Instance and Appeals Courts in the Emirates of Abu Dhabi, 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.
- DIFC Courts.
However, instead of ironing the creases and paving way for smoother execution of decrees, this declaration sparked controversy leading to multiple judicial interpretations w.r.t the international agreement between the two countries and the power of the Central Government to issue notifications with retrospective effect under Section 44A.
Two contrasting judgments were passed by the Hon’ble High Court of Kerala wherein they discussed the retrospective effect of the agreement and came to different conclusions. In the absence of a concrete principle in this regard and there being no appeal from these decisions, confusion will arise as to the applicability of these precedents in future disputes. Now let us discuss the two cases involved in detail.
Manoj Moolekkudi Subramanyan v. Rajesh Palliparambil Ravi (2020)
- This issue initially arose in the case of Manoj Moolekkudi Subramanyan v. Rajesh Palliparambil Ravi (2020). A decree for the realisation of money was passed by the Preliminary Court at Dubai and was confirmed by the Supreme Court at Dubai on a second appeal in 2015. An application for execution of the decree was filed in the District Court of Ernakulam under Section 44A of CPC in 2018. During the pendency of this suit, the Central Government declared the UAE to be a reciprocating territory under Section 44A of CPC.
- Thereafter, in March 2020 the issue of maintainability of the Execution Petition was heard by the Court and it was held that the decree is executable based on the agreement dated 25-10-1999 between India and the UAE which contained provisions for the execution of decrees for both countries and thus making the UAE a reciprocating territory under Section 44A of the CPC. The legality and propriety of the said order were challenged before a Single Judge Bench at the Hon’ble High Court of Kerala.
The Hon’ble Court divided the case into two broad issues as follows:
- Whether the existence of a reciprocating agreement between the UAE and India is sufficient to attract Section 44A of CPC
- Whether the notification of the Central Government declaring the UAE as a reciprocating territory has retrospective effect.
Observations of the Kerala High Court
Reciprocating agreement between India and UAE
- While deciding on the first issue, the Hon’ble Court followed the observations laid down by the Supreme Court in MV Al Quamar v. Tsavliris Salvage International Ltd (2000) and held that a decree-holder who seeks execution under Section 44A of the Code should possess a money decree that has been passed by a superior court of a reciprocating territory as recognised by the Central Government through a notification published in this regard in the Official Gazette of India in line with the procedure laid down under Section 44A.
- The Court further noted that Explanation 1 to Section 44A does not include an agreement between India and a foreign country or its publication. It only covers a declaration of a territory as a reciprocating territory by the Central Government through a notification published in the Official Gazette.
- Thus, the agreement which was entered by India with the United Arab Emirates cannot be substituted in the place of notification as mandated under Section 44A CPC.
Retrospective application of the notification
- While dealing with the second issue of the retrospective aspect of the notification, the Hon’ble Court observed that the Central Government or the State Government (or any other authority), without the authorisation under the parent statute, expressly or by necessary implication, cannot enact subordinate legislation having retrospective effect.
- In case of a notification, a retrospective application cannot be presumed unless the intention is manifestly expressed by the Central Government or has been implied by necessary implication. Explanation 1 to Section 44A does not indicate legislative intent for authorising the Central Government to issue a notification with retrospective effect. Section 44A appears procedural in its character but it affects the vested rights of a litigant i.e., the right of executing and enforcing a foreign decree passed by a reciprocating country in India and therefore is to be construed as prospective.
- Thus, the notification dated 17-01-2020 issued by the Central Government, declaring the UAE as a reciprocating territory for the purposes of Section 44A of CPC, is prospective in operation and has no retrospective effect.
Kadheeja Kalladi Puthanpurayil v. Nazia Mohammed Nazir (2021)
- In less than 6 months, this issue was knocking on the doors of the Hon’ble High Court of Kerala once again in the case of Kadheeja Kalladi Puthanpurayil v. Nazia Mohammed Nazir (2021). Herein, a decree was obtained by the petitioners from a Court in the UAE in 2018.
- An execution petition filed before the Family Court at Thrissur was dismissed based on the precedent set in the case of Manoj Subramanyan. However, the Division Bench of the Hon’ble Court overruled the judgement passed in the case of Manoj Subramanyan.
Observations of the Kerala High Court
- The Hon’ble Court while discussing the issue that whether the existence of a reciprocating agreement between the UAE and India is sufficient to attract Section 44A of CPC observed that the notification issued by the Central Government dated 17.01.2020 is a declaratory notification.
- The Court further noted that a declaratory statute or notification will operate retrospectively unless an intention contrary to such retrospective operation has been provided under the statute or notification. A declaration always needs to be construed with reference to something in existence. Thus, it must be related to the agreement.
- In light of the same, the Court held that any money decree of the UAE court can be executed in India if such a decree was passed after 25.10.1999, i.e., the date of the bilateral agreement between the UAE and India.
Analysis of the two cases
The key distinction in both cases is the treatment of the notification as a regular statute in the first case and as a declaratory statute in the second. To understand the essence of these judgments, one must understand the meaning of a declaratory statute. For modern purposes, a declaratory act is defined as an act to remove doubts existing as to the common law, or the meaning or effect of any statute. It does not create any new rights or obligations but merely declares and clarifies the real intention of the legislature in connection with an earlier existing transaction or enactment. The use of the words ‘it is declared’ is not conclusive that the Act is declaratory for these words may, at times, be used to introduce new rules of law.
While looking at the power to enact retrospective statutes, the principles governing the same must be kept in mind. Any statute which affects substantive rights and a statute that not only changes the procedure but also creates new rights and liabilities is construed to be prospective in operation unless otherwise provided, either expressly or by necessary implication. Now it is a well-settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, the retrospective operation should not be given to a statute so as to take away or impair any existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as enshrined in several decisions of the Supreme Court, as well as English courts, is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or evidence are prima facie prospective.
Article 2 of the Bilateral Agreement indicates that any request for legal assistance under the Agreement can only be made by the Central Authorities of the contracting parties i.e., the Ministry of Law, Justice and Company Affairs for India and the Ministry of Justice for the UAE. Further Article 22 states that it is the responsibility of the Central Authority of the requesting contracting party to submit specific documents for execution of decree including an official copy of the decree, a certificate as to the finality of decree etc. The Agreement does not recognize the rights of individuals of a contracting State to directly seek legal assistance from courts in the other contracting State for the execution of decrees or other legal issues. The Declaration made under Section 44A specifically creates a right in favour of individuals, giving them the power to seek execution of decrees in India if it has been passed by a superior court in the reciprocating territory i.e., the UAE. But a declaratory statute is limited to the removal of doubts in a legislature or clarifying the real intention of the legislature. It cannot create a new right. The words “declares that” used in the notification only indicates the introduction of new rules of law. In the absence of clear words indicating that the Notification is declaratory, and the Bilateral Agreement is clear and unambiguous, the notification made under Section 44A cannot be interpreted as a declaratory statute.
Further, no power has been vested by the legislature to the Central Government under Section 44A for giving retrospective effect to notifications made thereunder. In the absence of such authorization under the parent statute, the notification cannot be treated to have retrospective application. The Supreme Court of India has time and again reiterated that where the parent statute prescribes the mode of publication or promulgation, the mode specified has to be followed. Such a requirement is imperative and cannot be dispensed with. The requirement under Section 44A is for a notification to be published in the Official Gazette by the Central Government, and thus, only on such declaration of the Central Government can a territory be recognized as a reciprocating territory under the Act and no Bilateral Agreement between two countries can replace this mandate.
Although the decision of the Single Judge Bench has been overruled by the Division Bench, there is a lot of grey area in the set Precedent. That being so, the decision will be welcomed by parties who can now directly execute any decree obtained from a Superior Court in the UAE in Indian Courts, thereby dissuading them from the practice of filing fresh suits in Indian Courts for obtaining a decree. Only time will tell whether this judgment is a step in the right direction or is it a stepping stone for future litigations.
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