In a historical development of India and UAE relationship, UAE Judgment will be recognized and enforceable in India based on reciprocity as per the Notification issued by Government of India on 17 January 2020 (“Notification”).
On 17 January 2020, Government of India published in its official gazette Notification for recognition of the UAE as a ’Reciprocating Territory’ under The Code of Civil Procedure of 1908 of India (5 of 1908) (“Indian CPC”) relative to the enforcement of UAE judgments by Indian Courts. Thus, a judgment passed by a ‘Superior Court’ of UAE can be directly enforced in India by filing a certified and legalized copy of the final and conclusive judgment.
BACKGROUND OF THE NOTIFICATION
India and UAE had entered into an Agreement on 25 October 1999 on Juridical and Judicial Cooperation in Civil and Commercial Matters for the Service of Summons, Judicial Documents, Commissions, Execution of Judgments and Arbitral Awards (“Agreement’).
The Agreement so far only applied to service of summons, judicial documents or processes, recording of evidence by means of Letters of Request and / or commissions and execution of decrees and arbitral awards.
On 29 May 2000, the instrument of ratification of the Agreement was exchanged and published in the Indian Gazette on 16 December 2000. However, until publication of the Notification in official gazette on 17 January 2020, India had only given effect to service of summons and other process under Section 29 (c) of the CPC.
On 17 January 2020, the Ministry of Law and Justice of the Government of India issued a notification stating that:
“In exercise of the powers conferred by Explanation 1 to Section 44A of the Code of Civil Procedure Code of 1908 (5 of 1908), the Central Government hereby declares , United Arab Emirates to be a reciprocating territory for the purposes of the said section and the following Courts in United Arab Emirates shall be the superior Courts of that territory, namely:-
- Federal Supreme Court
- Federal, First Instance and Appeals Courts in the Emirates of Abu Dhabi,
Sharjah, Ajman, Umm Al Quwain and Fujairah.
- Abu Dhabi Judicial Department;
- Dubai Courts;
- Ras Al Khaimah Judicial Department;
- Courts of Abu Dhabi Global Markets;
- Courts of Dubai International Financial Centre”.
The Notification of 17 January 2020 is based on reciprocity. The judgment issued by foreign courts has no admissibility and hold no evidentiary value in Indian Courts, unless they are declared to be ‘Reciprocating Territories’ under Section 44 of Indian CPC.
Section 44A of Indian CPC summarises the principle of reciprocity, i.e. execution in India of foreign decree passed by a foreign country (reciprocating) and the manner in which it is to be done. The said provision provides:
“44A. Execution of Decrees passed by Courts in reciprocating territory—
(1) Where a certified copy of a decree of any of the superior Courts of any reciprocating territory has been filed in a District Court, the decree may be executed in India as if it has been passed by the District Court.
(2) Together with the certified copy of the decree, a certificate from such superior court shall be filed stating the extent, if any, to which the decree has been satisfied or adjusted and such certificate shall, for the purpose of proceedings under this section, be conclusive proof of the extent of such satisfaction or adjustment.
(3) The provisions of section 47 shall, as from the filing of the certified copy of the decree, apply to the proceedings of a District Court executing a decree under this section, and the District Court shall refuse execution of any such decree, if it is shown to the satisfaction of the Court that the decree falls within any the exceptions specified in clause (a) to (f) of section 13.
Explanation 1—”Reciprocating Territory’ means any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of this section; and “superior courts”, with any reference to any such territory, means such Courts as may be specified in the said notification.
Explanation 2—”Decree” with reference to a superior court means any decree or judgment of such Court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty, but shall in no case include an arbitration award, even if such an award is enforceable as a decree of judgment.”
In order to enforce a foreign judgment or decree in India as per the Notification, the judgment or decree should be final and conclusive as to any matter adjudicated by it. The test for conclusiveness of a foreign judgment or decree is laid down in Section 13 of the Indian CPC which states that a foreign judgment shall be conclusive unless:
- It has not been pronounced by a court of competent jurisdiction;
- It has not been given on the merits of the case;
- It appears, 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 in cases in which such law is applicable;
- The proceedings in which the judgment was obtained are opposed to natural justice;
- It has been obtained by fraud;
- It sustains a claim founded on a breach of any law in force in India.
Under the said Notification, India has identified the Superior Courts in UAE as enumerated above.
CLASSIFICATION OF FOREIGN DECREES UNDER INDIAN LAW
Under Indian Law, the foreign decrees are classified into two categories: decrees from reciprocating territory and non-reciprocating territories. Decrees from territories which the Central Government has notified as ‘reciprocating’ under Section 44A of CPC are decrees from reciprocating territory and all other decrees are decrees from non-reciprocating territories.
The Decree of a Superior Courts in a Reciprocating Territory can be executed directly by adhering the procedure under section 44A and Order XXI, Rule 22 of the Indian CPC. However, by reciprocity, the judgment-debtor can only defend the Judgment Creditor/Decree-Holder by raising any of the grounds under Section 13 of the CPC as enumerated above.
The Decree from the Non-Reciprocating Territory of India can only be enforced as a foreign judgment / decree by instituting a fresh case in an Indian Court with relevant Jurisdiction. Thus, enforcement of decrees from a ‘Non-Reciprocating Territory’ is a time-consuming and costly affair for instituting a fresh court proceeding, after obtaining a final and conclusive Judgment /Decree against the judgment debtor(s) from a foreign jurisdiction.
There is an ambiguity about the limitation period and the retrospective effect of the Notification.
Article 136 of the Schedule of the Indian Limitation Act of 1963 states that the period for limitation for the execution of any decree (other than the decree granting a mandatory injunction) or order of any Civil Court is 12 years from the date when the decree or order becomes enforceable or where the decree or any subsequent order directs any payment of money or the delivery of any property to be made at a certain date or at recurring periods, when default in making the payment or delivery in respect of which execution is sought, takes place. Therefore, based on the said Article, it can be construed that the limitation period for executing the foreign judgment in a Reciprocating Territory under section 44A of the Indian CPC shall be 12 years.
EFFECT OF THE NOTIFICATION DECLARING UAE AS AMONG THE “RECIPROCATING TERRITORIES”
Decrees/Judgment passed by Superior Courts of UAE can now be enforced by Indian Courts (relevant district courts in India) as if the Decree/Judgment was passed by the Indian Courts, subject to fulfilment of conditions specified under Section 13 of the Indian CPC. However, this benefit extends only to civil Decrees/Judgments passed by Superior Courts of UAE excluding ex-parte judgment.
The declaration of UAE as a Reciprocating Territory will give new hope for judgment creditors in UAE, who has obtained final and conclusive judgment in civil matters against persons in the UAE who flee to India to avoid prosecution by UAE courts.
The Notification is a turning point in execution and enforcement of civil judgment in India issued against persons in UAE by the Superior Courts. This Judgment is enforced by filing the certified and legalized judgment in the relevant Indian Courts.
Until now, it is extremely difficult, costly and time-consuming for the Judgment Creditors in UAE to recover the judgment amount if the debtor had fled to India. Now, based on the Notification, execution and enforcement of the civil judgment of the Superior Court of UAE can be done in India against the individual judgment debtors who had fled to India without settling their outstanding liabilities.
It is also to be noted that judgments issued against limited liability companies (LLC) in UAE cannot be executed in India even though the individual or corporate shareholders are in India unless the shareholders are either jointly or severally liable as per the judgment. However, the judgment can be enforced against its branch office in India.
The reason is that the company has a separate and distinctive legal personality from its shareholders, whose liability is generally limited to their contribution to the Company’s share capital and the assets and liabilities of the company are separate from its shareholders (known as the doctrine of Corporate Veil)- Article 21 of the UAE Commercial Companies Law ( Law No. 2 of 2015).
However, in certain circumstances, the Courts in UAE may seek to pierce the corporate veil when separation of the personality of a company and its shareholders is not maintained and make shareholders either jointly and severally liable for the liabilities of the company along with the company.
Lastly, a Judgment issued against a person in India (i.e. an Indian national) can be executed in India through concerned district Court with much simpler process without re-examining the merit of the case subject to conditions being satisfied under Section 13 of the Indian CPC.
This decision of the Indian Government will not only strengthen the bilateral judicial relationship between UAE and India, but also play an important role in further strengthening business relationship between the two Countries.