It is to the reciprocal advantage of the Courts of all nations to enforce
foreign rights as far as practicable. To this end, broad recognition of
substantive rights should not be defeated by some vague assumed
limitations of the Court. When substantive rights are so bound up in a
foreign remedy, the refusal to adopt the remedy would substantially
deprive parties of their rights. The necessity of maintaining the foreign
rights outweighs the practical difficulties involved in applying the foreign remedy.
foreign rights as far as practicable. To this end, broad recognition of
substantive rights should not be defeated by some vague assumed
limitations of the Court. When substantive rights are so bound up in a
foreign remedy, the refusal to adopt the remedy would substantially
deprive parties of their rights. The necessity of maintaining the foreign
rights outweighs the practical difficulties involved in applying the foreign remedy.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10106 OF 2016
M/S ALCON ELECTRONICS PVT. LTD
V
CELEM S.A. OF FOS 34320 ROUJAN, FRANCE & ANR.
Dated:DECEMBER 09, 2016
Citation:(2017) 2 SCC 253
1. In this appeal by special leave, the appellant—judgment debtor assails
the impugned judgment dated 8th April, 2013 passed by the High Court
of Bombay in Civil Revision Application No. 680 of 2011, whereby the
High Court has dismissed the application filed by the appellant seeking
declaration that the Judgment and Order dated 19th October, 2006
passed by the High Court of Justice, Chancery Division, Patents Court,
England (hereinafter referred to as ‘the English Court’) is not executable
before the District Court at Nasik, by confirming the order dated 15th
April, 2011 passed by the District Judge-2, Nasik.
2. The facts in nutshell are that the respondents herein filed a Suit against
the appellant before the English Court for infringement of patent vested
in the respondents besides other reliefs. In the said suit, the
appellant-defendant filed an application challenging the jurisdiction of
the English Court. In that application, the reliefs sought by the appellant
include the relief that the respondents—original claimants have to pay
the costs to the appellant occasioned by filing the application to be
summarily assessed. The English Court by its Order dated 19th October,
2006 dismissed the claim of the appellant and further directed it to pay
the costs of application to the respondents—original claimants set at
£ 12,229.75. Thereafter it appears that the appellant agreed to pay the
costs and sought for some time. When the respondents filed a petition
for execution in India, the appellant opposed it in an application on the
ground that the order of English Court is not executable. The executing
Court dismissed the same which was confirmed by the High Court.
Hence the appellant is before us by way of this appeal.
3. The appellant made following submissions assailing the Judgment of the
Courts belowa.
An interlocutory Order of English Court with respect to its own
jurisdiction (with or without a direction for payment of costs) does
not amount to a judgment ‘on merits of the case’ and is therefore
not conclusive under Section 13(b) of the Civil Procedure Code
(CPC for short).
b. In the alternative, the Order of the English Court in the present
case does not amount to ‘decree’ under Explanation 2 to Section
44A of the CPC.Page 3
3
c. Without prejudice to the aforesaid, the part of the order of the
English Court relating to the payment of interest on costs should
not be executed in view of the deletion of the erstwhile Section
35(3) of the CPC.
4. The Respondents have responded in the following manner. The decree
passed by the English Court is very much a decree on merits as the
English Court has not only given a detailed Judgment on merits of the
matter but also considered the entire evidence as produced by the
parties including oral evidence by way of witness statements,
documentary evidence produced by the parties and the application
challenging the jurisdiction of the English Court has been decided finally
on merits of the case put forth by the defendants. Nothing further was
required to be done insofar as consideration of the application of the
appellant challenging the jurisdiction of the English Court is concerned.
5. It is submitted that Explanation-II to Section 44A is concerned, the same
does not refer to costs which are defined under Section 35 of the CPC.
The costs having been quantified have assumed the character of a money
decree for costs which cannot be equated, either with a fines or penalty
which is imposed on a party by the Court or taxes payable to a local
authority or to a Government or other charges of like nature. It is the
submission of the respondent that the legislative intent was to keep out
of the purview of Section 44A the execution of the foreign decree if it
related to payment of either taxes or charges of a like nature or a fine or
penalty. Even an arbitration award has been excluded. At best it could
be argued that compensatory costs in respect of false or vexatious claims
which have been defined under Section 35A could be excluded.Page 4
4
6. It is further submitted that Section 13, CPC specifically excludes the
execution of such decrees which are mentioned under Clauses (a) to (f)
thereof and this Section does not mention decrees for the costs.
7. Furthermore they respond that the Judgments Act, 1838 of United
Kingdom, as amended in 1993, provides that every judgment debt shall
carry interest @ 8%. The rules framed in U.K. provide for interest to run
from the date the Judgment is given. The rules also provide that a
judgment or order takes effect from the day when it is given on merits or
such dates as Court may specify. The Rules further provide that a party
must comply with a judgment or order for the Payment of an amount of
money (including costs) within 14 days of the date of Judgment or order
unless the judgment or order specifies a different date for compliance or
any of the rule specify a different date for compliance or the Court has
stayed the proceedings or execution.
8. Moreover, all the Orders of the Court are required to be obeyed and
implemented, unless the Court itself sets a date for its non-execution.
Otherwise orders will only remain a piece of paper and merely decorate
the file of litigant, which would lead to an impression being created in
the minds of the litigants that they could with impunity avoid to obey the
Court Order. It is neither the legislative intent nor the desire of the
Judiciary.
9. Legislative intent of executing Orders relating to payments of costs is
clear from amendment carried out to section 36, CPC to clarify that the
provisions relating to execution of decree or order include payment
under a decree or order as well.Page 5
5
10. We have heard the learned counsel on either side at length and perused
the record. The following issues fall for our consideration:
(1) Whether the order passed by the Foreign Court falls within the
Exceptions to Section 13 of the CPC?
(2) Whether the order passed by the Foreign Court amounts to a
“decree” and the same is executable?
(3) If answer to issue No. 2 is in affirmative, whether the decree for
costs would fall within the ambit of Explanation 2 of Section 44A
(3) of CPC and makes it inexecutable?
(4) Whether interest on costs would fall within the ambit of
Explanation 2 of Section 44A of CPC?
(5) Whether the interest on costs can be executed in India in view of
deletion of Section 35(3) of CPC?
11. In re Issue No. 1 — Admittedly the English Court passed an order dated
19th October, 2006 dismissing the application passed by the appellant
questioning the jurisdiction of the Court. The appellant itself at the time
of filing the application has prayed the Court to summarily assess the
costs to be paid to him in the event of his application being allowed. Both
the appellant—defendant as well the respondents—claimants
participated in the proceedings by adducing their respective oral as well
as documentary evidence. Skelton arguments on behalf of both parties
were filed before Court. The appellant herein has filed schedule of costs
at £ 25,406.30. Then the English Court has passed a detailed order on
19th October, 2006 on the question of jurisdiction holding that it has
jurisdiction to entertain the Suit and also directed the defendants to payPage 6
6
the costs of the application which was summarily assessed at a sum of
£ 12,429.75.
12. It appears that the appellant herein has accepted the order and sought
for time to pay the costs. Moreover, it did not choose to approach the
appellate Court assailing the order and the same has attained finality. In
spite of the same, the appellant filed the application opposing the
execution petition filed by the respondents. The first and foremost
ground of attack against the order passed by the English Court is that
the order is not conclusive as per Section 13(b), CPC. Such argument
appears to be attractive but we are not able to appreciate the same in the
facts and circumstances of the case. Before we proceed further, it is
appropriate to have a look at Sections 13 and 14 of CPC which read as
under:
Section 13. When foreign judgment not conclusive : 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) where it has not been pronounced by a Court of
competent jurisdiction;
(b) where it has not been given on the merits of the case;
(c) 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;
(d) where the proceedings in which the judgment was
obtained are opposed to natural justice;
(e) where it has been obtained by fraud;
(f) where it sustains a claim founded on a breach of any
law in force in India.Page 7
7
Section 14. Presumption as to foreign judgments: The 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.
13. A plain reading of Section 13, CPC would show that to be conclusive an
order or decree must have been obtained after following the due judicial
process by giving reasonable notice and opportunity to all the proper and
necessary parties to put forth their case. When once these requirements
are fulfilled, the executing Court cannot enquire into the validity, legality
or otherwise of the judgment.
14. A glance on the enforcement of the foreign judgment, the position at
common law is very clear that a foreign judgment which has become
final and conclusive between the parties is not impeachable either on
facts or law except on limited grounds enunciated under Section 13,
CPC. In construing Section 13, CPC we have to look at the plain meaning
of the words and expressions used therein and need not look at any
other factors. Further, under Section 14, CPC there is a presumption
that the Foreign Court which passed the order is a Court of competent
jurisdiction which of course is a rebuttable presumption. In the present
case, the appellant does not dispute the jurisdiction of the English Court
but its grievance is, it is not executable on other grounds which are
canvassed before us.
15. The appellant contends that the order of the English Court is not given
on merits and that it falls under Section 13(c) of the CPC as a result of
which it is not conclusive and therefore inexecutable. We cannot accept
such submission. A judgment can be considered as a judgment passed
on merits when the Court deciding the case gives opportunity to the
parties to the case to put forth their case and after considering the rival
submissions, gives its decision in the form of an order or judgment, it is
certainly an order on merits of the case in the context of interpretation of
Section 13(c) of the CPC.
16. Applying the same analogy to the facts of the case on hand, we have no
hesitation to hold that the order passed by the English Court is an order
on merits. The appellant who has submitted itself to the jurisdiction of
the Court and on its own requested the Court to assess the costs
summarily. While passing a reasoned order by dismissing the application
filed by the appellant, English Court granted the costs against the
appellant. Had it been the case where appellant’s application was
allowed and costs were awarded to it, it would have as well filed a
petition for the execution of the order. Be that as it is, the appellant did
not prefer any appeal and indeed sought time to pay the costs. The
appellant, therefore, cannot be permitted to object the execution. It
cannot be permitted to blow hot and cold at the same time. In our
opinion, it is a pure abuse of process of law and the Courts should be
very cautious in entertaining such petitions.
17. In International Woollen Mills v. Standard Wool (UK) Ltd.
1
, this
Court observed :
“...Even where the defendant chooses to remain ex parte and
to keep out, it is possible for the plaintiff to adduce evidence
in support of his claim (and such evidence is generally
insisted on by the Courts in India), so that the Court may
give a decision on the merits of his case after a due
consideration of such evidence instead of dispensing
with such consideration and giving a decree merely on
1 AIR 2001 SC 2134
account of the default of appearance of the defendant.
In the former case the judgment will be one on the
merits of the case, while in the latter the judgment will
be one not on the merits of the case. Thus it is obvious
that the non-appearance of the defendant will not by itself
determine the nature of the judgment one way or the other.
That appears to be the reason why Section 13 does not refer
to ex parte judgments falling under a separate category by
themselves...”
18. The principles of comity of nation demand us to respect the order of
English Court. Even in regard to an interlocutory order, Indian Courts
have to give due weight to such order unless it falls under any of the
exceptions under Section 13 of the CPC. Hence we feel that the order in
the present case passed by the English Court does not fall under any of
the exceptions to Section 13 of the CPC and it is a conclusive one. The
contention of the appellant that the order is the one not on merits
deserves no consideration and therefore liable to be rejected.
Accordingly, Issue No. 1 is answered.
19. In re Issue No. 2 — The next ground put forth by the appellant is that
the order being an interlocutory order does not have the shades of a
‘judgment’ to be executed before the Indian Court and hence the order
not being a ‘decree’ is in executable. To appreciate this, it is appropriate
to have a look at Section 44A of CPC
44A. Execution of decrees passed by Courts in
reciprocating territory—
(1) Where a certified copy of 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 had been passed by the District Court.
(2) Together with the certified copy of the decree shall be
filed a certificate from such superior Court stating the
extent, if any, to which the decree has been satisfied or
adjusted and such certificate shall, for the purposes 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 of the exceptions specified in
clauses (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 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 to a fine or other penalty, but shall
in no case include an arbitration award, even if such an
award is enforceable as a decree or judgment.
20. As far as the explanation with regard to reciprocal territory is concerned,
there is no dispute that England is a reciprocating territory for the
purpose of above Section. Section 44A of CPC indicates an independent
right conferred on a foreign decree holder for enforcement of a
Decree/Order in India. Section 44A was inserted by Section 2 of the Civil
Procedure Code (Amendment) Act, 1937 (Act No. 8 of 1937). This Section
is meant to give effect to the policy contained in the Foreign Judgments
(Reciprocal Enforcement) Act, 1933. It is a part of the arrangement
under which on one part decrees of Indian Courts are made executable
in United Kingdom and on the other part, decrees of Courts in the
United Kingdom and other notified parts of Her Majesty’s dominions are
made executable in India. It is to be seen that as United Kingdom is a
reciprocating territory and the High Court of Justice, Chancery Division,
England being a recognized superior Court in England. Therefore, the
order passed by that Court is executable in India under Section 44A of
the CPC. Now we come to the next limb of the argument put forth by the
appellant that the order passed by the English Court does not amount to
a decree and hence it is not executable. It is no doubt correct, Section
44A of CPC deals with “execution of decrees passed by Courts in
reciprocating territory”. Before we further decide this issue it is
appropriate to have a look at how decree, order and foreign judgment are
defined under the CPC.
21. As per Section 2(2) of the CPC, "decree" means the formal expression of
an adjudication which, so far as regards the Court expressing it,
conclusively determines the rights of the parties with regard to all or any
of the matters in controversy in the suit and may be either preliminary
or final. It shall be deemed to include the rejection of a plaint and the
determination of any question within Section 144 of CPC but shall not
include (a) any adjudication from which an appeal lies as an appeal from
an order, or (b) any order of dismissal for default.
Then a “foreign judgment” is defined under Section 2(6) as
judgment of a foreign Court. “Judgment” as per Section 2(9) of C.P.C.
means the statement given by the Judge on the grounds of a decree or
order. Order is defined under Section 2(14) of CPC as a formal
expression of any decision of the Civil Court which is not a ‘decree’. Then
Explanation 2 to Section 44A (3) says "decree" with reference to a
superior Court means any ‘decree’ or ‘judgment’. As per the plain reading
of the definition ‘Judgment’ means the statement given by the Judge on
the grounds of decree or order and order is a formal expression of a
Court. Thus “decree” includes judgment and “judgment” includes
“order”. On conjoint reading of ‘decree’, ‘judgment’ and ‘order’ from any
angle, the order passed by the English Court falls within the definition of
‘Order’ and therefore, it is a judgment and thus becomes a “decree” as
per Explanation to Section 44A(3) of CPC. In this case, the Court at
England, after following the principles of natural justice, by recording
reasons and very importantly basing on the application of the appellant
itself, has conclusively decided the issue with regard to jurisdiction
and passed the order coupled with costs. Hence in our considered
opinion, the order passed by the Foreign Court is conclusive in that
respect and on merits. Hence executable as a decree and accordingly the
issue is answered.
22. In re Issue Nos. 3 & 4 — The next contention advanced is that the
decree for costs does not attract the Explanation II of Section 44A which
concerns itself with taxation or other charges of like nature or in respect
of fine or other penalty. We have to first see the nature of the costs
imposed by the decree for interpreting the relevant explanation. Before
referring to the principles/guidelines in the decisions cited, it would be
apposite to advert to the concept of ‘costs’ and the general principles
governing the award of costs. Law Commission in its 240th Report on
“Costs on Civil Litigation” provides valuable resource on nature of costs
in India as well as England.
23. The ‘costs’ signifies the sum of money which the Court orders one party
to pay to another party in respect of the expenses of litigation incurred.Page 13
13
Except where specifically provided by the statute or by rules of the
Court, the costs of proceedings are in the Court’s discretion.
24. In Johnstone v. The Law Society of Prince Edward Island 2
, the
Canadian Court of Appeal speaking through McQuaid, J described costs
in the following words :
“… the sum of money which the court orders one party to
pay another party in an action as compensation for the
expense of litigation incurred. The definition continues to the
effect that costs are awarded as compensation (i.e.
reimbursement); there is, unlike damages, no restitution in
integrum, that is to say, no concept in costs, as there exists
in damages, that the injured person should be placed, in so
far as money can do so, in the same position as he occupied
before the injury was suffered”.
25. Under the Federal Rules of Civil Proceeding (USA), “costs shall be
allowed as of course to the prevailing party unless the court otherwise
directs.” In most of the States in US, the attorney’s fee is not allowed as
litigation cost. Costs can even be on interim Application. A bill of costs is
a certified, itemized statement of the amount of the expenses incurred in
bringing or defending a law suit/proceeding. The charges/expenses
claimed are taxed by the Court or its officer according to the procedural
rules and set of norms.
26. The basis of assessment of costs in UK has been explained thus in
Halsbury’s Laws of England:
“Where the court is to assess the amount of costs (whether
by summary or detailed assessment) it will assess those
costs on the standard basis or on the indemnity basis, but
the court will not in either case allow costs which have been
unreasonably incurred or are unreasonable in amount.
Where the amount of costs is to be assessed on the standard
basis, the court will only allow costs which are proportionate
to the matters in issue and will resolve any doubt which it
may have as to whether costs were reasonably incurred or
2 2 PEIR B-28 (1988)Page 14
14
reasonable and proportionate in amount in favour of the
paying party. Where the amount of costs is to be assessed
on the indemnity basis, the court will resolve any doubt
which it may have as to whether costs were reasonably
incurred or were reasonable in amount in favour of the
receiving party. Where the court makes an order about costs
without indicating the basis on which the costs are to be
assessed, or makes an order for costs to be assessed on a
basis other than the standard basis or the indemnity basis,
the costs will be assessed on the standard basis.”
27. The Part 44 of the Civil Procedure Rules (CPR) in the USA contains
general rules about costs and entitlement to costs. The rules are
supplemented by practice direction. However, part 44 does not apply to
the assessment of costs to the extent different provisions exist, for eg,
Access to Justice Act, 1999 and the Legal Aid Act, 1988. Further, the
general rule that the unsuccessful party will be ordered to pay the costs
of the successful party unless the court makes a different order does not
apply to family proceedings.
28. It is important to note that a penalty in this sense normally means a
sum payable to the State, not to a private claimant, so the costs imposed
on the basis of the indemnity is not a penalty or tax. Therefore, the
Explanation II to Section 44A does not refer to the costs as contemplated
under Section 35 of the CPC. The costs having been quantified have
assumed the character of a money decree for costs and cannot be
equated, either with a fine or penalty which is imposed on a party by the
Court or taxes claimed and are taxes payable to a local authority,
Government, or other charges of a like nature.
29. The appellant has advanced an argument that as per Section 35A of the
CPC, no Court should pass any order for the payment of compensatory
costs exceeding Rs.3,000/- or exceeding the limits of its pecuniaryPage 15
15
jurisdiction of the said Court whichever amount is less. It is thus argued
by the appellant that in the present case, since the costs imposed exceed
the bar imposed by Section 35A, therefore, the order of the English Court
is not executable in the present case.
30. This argument lacks merit and deserves to be rejected. A bare perusal of
Section 35A shows that bar operates on the Indian Courts with regard to
imposition of costs in respect of false or vexatious claims or defences.
The bar is not attracted in the present case as the Court that has
ordered the costs is the High Court of Justice in England which is not
governed by the provisions of the CPC and that the respondent merely
approached the Indian Courts for the satisfaction of a foreign decree.
Moreover, the nature of compensatory costs prescribed in Section 35A of
the CPC are different from ‘costs’ dealt with in Section 35 of the CPC as
the former are limited to the claims of defences of a party which are
frivolous or vexatious. It is settled that before awarding costs under
Section 35A of the CPC, the Court should satisfy itself that the claim was
false or vexatious to the knowledge of the party who put it forward and
that the interests of justice require the award of such compensatory
costs. In the present case, no claim has been advanced by the appellant
that the claim filed by the respondents is false or vexatious, therefore,
the bar in Section 35A is not applicable. Accordingly the issue is
answered.
31. In re Issue No. 5 — It is the case of the appellant that the claim for
interest on costs is not recognized in the Indian law. It is to be noted that
matters of procedure are to be governed by the lex fori, whereas the
matters of the substance are governed by lex causae. In this case, the
question whether the interest on sum of decree of costs to be executed in
India is a matter of substance as the interest on decree is a substantive
right of the decree holder and does not concern itself with the procedural
law of the forum.
32. The appellant relied upon Section 35 of the CPC which enables Courts in
India to impose litigation costs at the discretion of the Court. However,
there is no provision under the CPC or the Interest Act, 1978 which
permits imposition of interest on litigation costs. Further tried to impress
upon that the amended Section 35(3) of the CPC permitted a Civil Court
to grant interest on costs. The unamended Section 35(3) stated as
follows:
The Court may give interest on costs at any rate not
exceeding six per cent per annum, and such interest shall be
added to the costs and shall be recoverable as such.
This Provision was consciously omitted in 1956 (pursuant to Act 66 of
1956). In view of the deletion of Section 35(3) of the CPC, it is argued
that grant of interest on costs is no longer recognized under India law.
33. In this context, it is educative to read the following comments made in
the Debate on the Bill against the deletion of Section 35 (3), by Hon’ble
Member of Lok Sabha Shri Tek Chand;
“..In this connection, a reference has been made to section
35, sub-section (3), which according to clause 3 of the Bill, is
to be omitted. Not that I have usurious propensities, but I do
not like this provision. It is true that there should not be any
profiteering by the people; I concede that, but there are
instances when the costs amount to five figures or more,
and there is no reason why, when an unsuccessful party is
subjecting the successful party not only to a long dilatory
and unending dispute, but also to frivolous and vexatious
litigation whereby he is out of pocket to the tune of several
thousands, the law or the legislature should be so solicitous
that such person should not pay interest, if he does not
propose to pay or if he intends to delay the payment of the
costs. One unfortunate and unhappy feature of
administration of civil law in our land, is apart from delays
and objections of frivolous and vexatious nature, justice is
made available, if at all, at a very high and exorbitant price”.
34. The Hon’ble Member of Lok Sabha thus articulated that omitting
sub-section (3) would encourage delay in realization of decree costs. A
reference to the Report of Law Commission and the views expressed in
Debate on the Bill, as extracted in the Law Commission Report (supra),
would indicate that the consequences of deletion of sub-section (3) of
Section 35 were very much considered by the Parliament. When the idea
of deletion is not to encourage interest on costs as a source of income to
the litigants, the Parliament did not choose positively to prohibit interest
on costs by inserting suitable clause in Section 35.
35. It is to the reciprocal advantage of the Courts of all nations to enforce
foreign rights as far as practicable. To this end, broad recognition of
substantive rights should not be defeated by some vague assumed
limitations of the Court. When substantive rights are so bound up in a
foreign remedy, the refusal to adopt the remedy would substantially
deprive parties of their rights. The necessity of maintaining the foreign
rights outweighs the practical difficulties involved in applying the foreign
remedy. In India, although the interest on costs are not available due to
exclusion of Section 35(3), the same does not mean that Indian Courts
are powerless to execute the decree for interest on costs. Indian Courts
are very much entitled to address the issue for execution of the interest
amount. The right to 8% interest as per the Judgments Act, 1838 of UK
can be recognized and as well as implemented in India.
36. Therefore, we are of the considered opinion that the Execution Petition
filed by the Respondents for execution of the order dated 19th October,
2006 passed by the English Court is maintainable under the relevant
provisions. Therefore, we do not find any reason to interfere with the
impugned order. Resultantly, the appeal is dismissed with costs.
……………………………………J.
(A.K. SIKRI)
NEW DELHI, ……………………………………J.
DECEMBER 09, 2016 (N.V. RAMANA)
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10106 OF 2016
M/S ALCON ELECTRONICS PVT. LTD
V
CELEM S.A. OF FOS 34320 ROUJAN, FRANCE & ANR.
Dated:DECEMBER 09, 2016
Citation:(2017) 2 SCC 253
1. In this appeal by special leave, the appellant—judgment debtor assails
the impugned judgment dated 8th April, 2013 passed by the High Court
of Bombay in Civil Revision Application No. 680 of 2011, whereby the
High Court has dismissed the application filed by the appellant seeking
declaration that the Judgment and Order dated 19th October, 2006
passed by the High Court of Justice, Chancery Division, Patents Court,
England (hereinafter referred to as ‘the English Court’) is not executable
before the District Court at Nasik, by confirming the order dated 15th
April, 2011 passed by the District Judge-2, Nasik.
2. The facts in nutshell are that the respondents herein filed a Suit against
the appellant before the English Court for infringement of patent vested
in the respondents besides other reliefs. In the said suit, the
appellant-defendant filed an application challenging the jurisdiction of
the English Court. In that application, the reliefs sought by the appellant
include the relief that the respondents—original claimants have to pay
the costs to the appellant occasioned by filing the application to be
summarily assessed. The English Court by its Order dated 19th October,
2006 dismissed the claim of the appellant and further directed it to pay
the costs of application to the respondents—original claimants set at
£ 12,229.75. Thereafter it appears that the appellant agreed to pay the
costs and sought for some time. When the respondents filed a petition
for execution in India, the appellant opposed it in an application on the
ground that the order of English Court is not executable. The executing
Court dismissed the same which was confirmed by the High Court.
Hence the appellant is before us by way of this appeal.
3. The appellant made following submissions assailing the Judgment of the
Courts belowa.
An interlocutory Order of English Court with respect to its own
jurisdiction (with or without a direction for payment of costs) does
not amount to a judgment ‘on merits of the case’ and is therefore
not conclusive under Section 13(b) of the Civil Procedure Code
(CPC for short).
b. In the alternative, the Order of the English Court in the present
case does not amount to ‘decree’ under Explanation 2 to Section
44A of the CPC.Page 3
3
c. Without prejudice to the aforesaid, the part of the order of the
English Court relating to the payment of interest on costs should
not be executed in view of the deletion of the erstwhile Section
35(3) of the CPC.
4. The Respondents have responded in the following manner. The decree
passed by the English Court is very much a decree on merits as the
English Court has not only given a detailed Judgment on merits of the
matter but also considered the entire evidence as produced by the
parties including oral evidence by way of witness statements,
documentary evidence produced by the parties and the application
challenging the jurisdiction of the English Court has been decided finally
on merits of the case put forth by the defendants. Nothing further was
required to be done insofar as consideration of the application of the
appellant challenging the jurisdiction of the English Court is concerned.
5. It is submitted that Explanation-II to Section 44A is concerned, the same
does not refer to costs which are defined under Section 35 of the CPC.
The costs having been quantified have assumed the character of a money
decree for costs which cannot be equated, either with a fines or penalty
which is imposed on a party by the Court or taxes payable to a local
authority or to a Government or other charges of like nature. It is the
submission of the respondent that the legislative intent was to keep out
of the purview of Section 44A the execution of the foreign decree if it
related to payment of either taxes or charges of a like nature or a fine or
penalty. Even an arbitration award has been excluded. At best it could
be argued that compensatory costs in respect of false or vexatious claims
which have been defined under Section 35A could be excluded.Page 4
4
6. It is further submitted that Section 13, CPC specifically excludes the
execution of such decrees which are mentioned under Clauses (a) to (f)
thereof and this Section does not mention decrees for the costs.
7. Furthermore they respond that the Judgments Act, 1838 of United
Kingdom, as amended in 1993, provides that every judgment debt shall
carry interest @ 8%. The rules framed in U.K. provide for interest to run
from the date the Judgment is given. The rules also provide that a
judgment or order takes effect from the day when it is given on merits or
such dates as Court may specify. The Rules further provide that a party
must comply with a judgment or order for the Payment of an amount of
money (including costs) within 14 days of the date of Judgment or order
unless the judgment or order specifies a different date for compliance or
any of the rule specify a different date for compliance or the Court has
stayed the proceedings or execution.
8. Moreover, all the Orders of the Court are required to be obeyed and
implemented, unless the Court itself sets a date for its non-execution.
Otherwise orders will only remain a piece of paper and merely decorate
the file of litigant, which would lead to an impression being created in
the minds of the litigants that they could with impunity avoid to obey the
Court Order. It is neither the legislative intent nor the desire of the
Judiciary.
9. Legislative intent of executing Orders relating to payments of costs is
clear from amendment carried out to section 36, CPC to clarify that the
provisions relating to execution of decree or order include payment
under a decree or order as well.Page 5
5
10. We have heard the learned counsel on either side at length and perused
the record. The following issues fall for our consideration:
(1) Whether the order passed by the Foreign Court falls within the
Exceptions to Section 13 of the CPC?
(2) Whether the order passed by the Foreign Court amounts to a
“decree” and the same is executable?
(3) If answer to issue No. 2 is in affirmative, whether the decree for
costs would fall within the ambit of Explanation 2 of Section 44A
(3) of CPC and makes it inexecutable?
(4) Whether interest on costs would fall within the ambit of
Explanation 2 of Section 44A of CPC?
(5) Whether the interest on costs can be executed in India in view of
deletion of Section 35(3) of CPC?
11. In re Issue No. 1 — Admittedly the English Court passed an order dated
19th October, 2006 dismissing the application passed by the appellant
questioning the jurisdiction of the Court. The appellant itself at the time
of filing the application has prayed the Court to summarily assess the
costs to be paid to him in the event of his application being allowed. Both
the appellant—defendant as well the respondents—claimants
participated in the proceedings by adducing their respective oral as well
as documentary evidence. Skelton arguments on behalf of both parties
were filed before Court. The appellant herein has filed schedule of costs
at £ 25,406.30. Then the English Court has passed a detailed order on
19th October, 2006 on the question of jurisdiction holding that it has
jurisdiction to entertain the Suit and also directed the defendants to payPage 6
6
the costs of the application which was summarily assessed at a sum of
£ 12,429.75.
12. It appears that the appellant herein has accepted the order and sought
for time to pay the costs. Moreover, it did not choose to approach the
appellate Court assailing the order and the same has attained finality. In
spite of the same, the appellant filed the application opposing the
execution petition filed by the respondents. The first and foremost
ground of attack against the order passed by the English Court is that
the order is not conclusive as per Section 13(b), CPC. Such argument
appears to be attractive but we are not able to appreciate the same in the
facts and circumstances of the case. Before we proceed further, it is
appropriate to have a look at Sections 13 and 14 of CPC which read as
under:
Section 13. When foreign judgment not conclusive : 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) where it has not been pronounced by a Court of
competent jurisdiction;
(b) where it has not been given on the merits of the case;
(c) 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;
(d) where the proceedings in which the judgment was
obtained are opposed to natural justice;
(e) where it has been obtained by fraud;
(f) where it sustains a claim founded on a breach of any
law in force in India.Page 7
7
Section 14. Presumption as to foreign judgments: The 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.
13. A plain reading of Section 13, CPC would show that to be conclusive an
order or decree must have been obtained after following the due judicial
process by giving reasonable notice and opportunity to all the proper and
necessary parties to put forth their case. When once these requirements
are fulfilled, the executing Court cannot enquire into the validity, legality
or otherwise of the judgment.
14. A glance on the enforcement of the foreign judgment, the position at
common law is very clear that a foreign judgment which has become
final and conclusive between the parties is not impeachable either on
facts or law except on limited grounds enunciated under Section 13,
CPC. In construing Section 13, CPC we have to look at the plain meaning
of the words and expressions used therein and need not look at any
other factors. Further, under Section 14, CPC there is a presumption
that the Foreign Court which passed the order is a Court of competent
jurisdiction which of course is a rebuttable presumption. In the present
case, the appellant does not dispute the jurisdiction of the English Court
but its grievance is, it is not executable on other grounds which are
canvassed before us.
15. The appellant contends that the order of the English Court is not given
on merits and that it falls under Section 13(c) of the CPC as a result of
which it is not conclusive and therefore inexecutable. We cannot accept
such submission. A judgment can be considered as a judgment passed
on merits when the Court deciding the case gives opportunity to the
parties to the case to put forth their case and after considering the rival
submissions, gives its decision in the form of an order or judgment, it is
certainly an order on merits of the case in the context of interpretation of
Section 13(c) of the CPC.
16. Applying the same analogy to the facts of the case on hand, we have no
hesitation to hold that the order passed by the English Court is an order
on merits. The appellant who has submitted itself to the jurisdiction of
the Court and on its own requested the Court to assess the costs
summarily. While passing a reasoned order by dismissing the application
filed by the appellant, English Court granted the costs against the
appellant. Had it been the case where appellant’s application was
allowed and costs were awarded to it, it would have as well filed a
petition for the execution of the order. Be that as it is, the appellant did
not prefer any appeal and indeed sought time to pay the costs. The
appellant, therefore, cannot be permitted to object the execution. It
cannot be permitted to blow hot and cold at the same time. In our
opinion, it is a pure abuse of process of law and the Courts should be
very cautious in entertaining such petitions.
17. In International Woollen Mills v. Standard Wool (UK) Ltd.
1
, this
Court observed :
“...Even where the defendant chooses to remain ex parte and
to keep out, it is possible for the plaintiff to adduce evidence
in support of his claim (and such evidence is generally
insisted on by the Courts in India), so that the Court may
give a decision on the merits of his case after a due
consideration of such evidence instead of dispensing
with such consideration and giving a decree merely on
1 AIR 2001 SC 2134
account of the default of appearance of the defendant.
In the former case the judgment will be one on the
merits of the case, while in the latter the judgment will
be one not on the merits of the case. Thus it is obvious
that the non-appearance of the defendant will not by itself
determine the nature of the judgment one way or the other.
That appears to be the reason why Section 13 does not refer
to ex parte judgments falling under a separate category by
themselves...”
18. The principles of comity of nation demand us to respect the order of
English Court. Even in regard to an interlocutory order, Indian Courts
have to give due weight to such order unless it falls under any of the
exceptions under Section 13 of the CPC. Hence we feel that the order in
the present case passed by the English Court does not fall under any of
the exceptions to Section 13 of the CPC and it is a conclusive one. The
contention of the appellant that the order is the one not on merits
deserves no consideration and therefore liable to be rejected.
Accordingly, Issue No. 1 is answered.
19. In re Issue No. 2 — The next ground put forth by the appellant is that
the order being an interlocutory order does not have the shades of a
‘judgment’ to be executed before the Indian Court and hence the order
not being a ‘decree’ is in executable. To appreciate this, it is appropriate
to have a look at Section 44A of CPC
44A. Execution of decrees passed by Courts in
reciprocating territory—
(1) Where a certified copy of 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 had been passed by the District Court.
(2) Together with the certified copy of the decree shall be
filed a certificate from such superior Court stating the
extent, if any, to which the decree has been satisfied or
adjusted and such certificate shall, for the purposes 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 of the exceptions specified in
clauses (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 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 to a fine or other penalty, but shall
in no case include an arbitration award, even if such an
award is enforceable as a decree or judgment.
20. As far as the explanation with regard to reciprocal territory is concerned,
there is no dispute that England is a reciprocating territory for the
purpose of above Section. Section 44A of CPC indicates an independent
right conferred on a foreign decree holder for enforcement of a
Decree/Order in India. Section 44A was inserted by Section 2 of the Civil
Procedure Code (Amendment) Act, 1937 (Act No. 8 of 1937). This Section
is meant to give effect to the policy contained in the Foreign Judgments
(Reciprocal Enforcement) Act, 1933. It is a part of the arrangement
under which on one part decrees of Indian Courts are made executable
in United Kingdom and on the other part, decrees of Courts in the
United Kingdom and other notified parts of Her Majesty’s dominions are
made executable in India. It is to be seen that as United Kingdom is a
reciprocating territory and the High Court of Justice, Chancery Division,
England being a recognized superior Court in England. Therefore, the
order passed by that Court is executable in India under Section 44A of
the CPC. Now we come to the next limb of the argument put forth by the
appellant that the order passed by the English Court does not amount to
a decree and hence it is not executable. It is no doubt correct, Section
44A of CPC deals with “execution of decrees passed by Courts in
reciprocating territory”. Before we further decide this issue it is
appropriate to have a look at how decree, order and foreign judgment are
defined under the CPC.
21. As per Section 2(2) of the CPC, "decree" means the formal expression of
an adjudication which, so far as regards the Court expressing it,
conclusively determines the rights of the parties with regard to all or any
of the matters in controversy in the suit and may be either preliminary
or final. It shall be deemed to include the rejection of a plaint and the
determination of any question within Section 144 of CPC but shall not
include (a) any adjudication from which an appeal lies as an appeal from
an order, or (b) any order of dismissal for default.
Then a “foreign judgment” is defined under Section 2(6) as
judgment of a foreign Court. “Judgment” as per Section 2(9) of C.P.C.
means the statement given by the Judge on the grounds of a decree or
order. Order is defined under Section 2(14) of CPC as a formal
expression of any decision of the Civil Court which is not a ‘decree’. Then
Explanation 2 to Section 44A (3) says "decree" with reference to a
superior Court means any ‘decree’ or ‘judgment’. As per the plain reading
of the definition ‘Judgment’ means the statement given by the Judge on
the grounds of decree or order and order is a formal expression of a
Court. Thus “decree” includes judgment and “judgment” includes
“order”. On conjoint reading of ‘decree’, ‘judgment’ and ‘order’ from any
angle, the order passed by the English Court falls within the definition of
‘Order’ and therefore, it is a judgment and thus becomes a “decree” as
per Explanation to Section 44A(3) of CPC. In this case, the Court at
England, after following the principles of natural justice, by recording
reasons and very importantly basing on the application of the appellant
itself, has conclusively decided the issue with regard to jurisdiction
and passed the order coupled with costs. Hence in our considered
opinion, the order passed by the Foreign Court is conclusive in that
respect and on merits. Hence executable as a decree and accordingly the
issue is answered.
22. In re Issue Nos. 3 & 4 — The next contention advanced is that the
decree for costs does not attract the Explanation II of Section 44A which
concerns itself with taxation or other charges of like nature or in respect
of fine or other penalty. We have to first see the nature of the costs
imposed by the decree for interpreting the relevant explanation. Before
referring to the principles/guidelines in the decisions cited, it would be
apposite to advert to the concept of ‘costs’ and the general principles
governing the award of costs. Law Commission in its 240th Report on
“Costs on Civil Litigation” provides valuable resource on nature of costs
in India as well as England.
23. The ‘costs’ signifies the sum of money which the Court orders one party
to pay to another party in respect of the expenses of litigation incurred.Page 13
13
Except where specifically provided by the statute or by rules of the
Court, the costs of proceedings are in the Court’s discretion.
24. In Johnstone v. The Law Society of Prince Edward Island 2
, the
Canadian Court of Appeal speaking through McQuaid, J described costs
in the following words :
“… the sum of money which the court orders one party to
pay another party in an action as compensation for the
expense of litigation incurred. The definition continues to the
effect that costs are awarded as compensation (i.e.
reimbursement); there is, unlike damages, no restitution in
integrum, that is to say, no concept in costs, as there exists
in damages, that the injured person should be placed, in so
far as money can do so, in the same position as he occupied
before the injury was suffered”.
25. Under the Federal Rules of Civil Proceeding (USA), “costs shall be
allowed as of course to the prevailing party unless the court otherwise
directs.” In most of the States in US, the attorney’s fee is not allowed as
litigation cost. Costs can even be on interim Application. A bill of costs is
a certified, itemized statement of the amount of the expenses incurred in
bringing or defending a law suit/proceeding. The charges/expenses
claimed are taxed by the Court or its officer according to the procedural
rules and set of norms.
26. The basis of assessment of costs in UK has been explained thus in
Halsbury’s Laws of England:
“Where the court is to assess the amount of costs (whether
by summary or detailed assessment) it will assess those
costs on the standard basis or on the indemnity basis, but
the court will not in either case allow costs which have been
unreasonably incurred or are unreasonable in amount.
Where the amount of costs is to be assessed on the standard
basis, the court will only allow costs which are proportionate
to the matters in issue and will resolve any doubt which it
may have as to whether costs were reasonably incurred or
2 2 PEIR B-28 (1988)Page 14
14
reasonable and proportionate in amount in favour of the
paying party. Where the amount of costs is to be assessed
on the indemnity basis, the court will resolve any doubt
which it may have as to whether costs were reasonably
incurred or were reasonable in amount in favour of the
receiving party. Where the court makes an order about costs
without indicating the basis on which the costs are to be
assessed, or makes an order for costs to be assessed on a
basis other than the standard basis or the indemnity basis,
the costs will be assessed on the standard basis.”
27. The Part 44 of the Civil Procedure Rules (CPR) in the USA contains
general rules about costs and entitlement to costs. The rules are
supplemented by practice direction. However, part 44 does not apply to
the assessment of costs to the extent different provisions exist, for eg,
Access to Justice Act, 1999 and the Legal Aid Act, 1988. Further, the
general rule that the unsuccessful party will be ordered to pay the costs
of the successful party unless the court makes a different order does not
apply to family proceedings.
28. It is important to note that a penalty in this sense normally means a
sum payable to the State, not to a private claimant, so the costs imposed
on the basis of the indemnity is not a penalty or tax. Therefore, the
Explanation II to Section 44A does not refer to the costs as contemplated
under Section 35 of the CPC. The costs having been quantified have
assumed the character of a money decree for costs and cannot be
equated, either with a fine or penalty which is imposed on a party by the
Court or taxes claimed and are taxes payable to a local authority,
Government, or other charges of a like nature.
29. The appellant has advanced an argument that as per Section 35A of the
CPC, no Court should pass any order for the payment of compensatory
costs exceeding Rs.3,000/- or exceeding the limits of its pecuniaryPage 15
15
jurisdiction of the said Court whichever amount is less. It is thus argued
by the appellant that in the present case, since the costs imposed exceed
the bar imposed by Section 35A, therefore, the order of the English Court
is not executable in the present case.
30. This argument lacks merit and deserves to be rejected. A bare perusal of
Section 35A shows that bar operates on the Indian Courts with regard to
imposition of costs in respect of false or vexatious claims or defences.
The bar is not attracted in the present case as the Court that has
ordered the costs is the High Court of Justice in England which is not
governed by the provisions of the CPC and that the respondent merely
approached the Indian Courts for the satisfaction of a foreign decree.
Moreover, the nature of compensatory costs prescribed in Section 35A of
the CPC are different from ‘costs’ dealt with in Section 35 of the CPC as
the former are limited to the claims of defences of a party which are
frivolous or vexatious. It is settled that before awarding costs under
Section 35A of the CPC, the Court should satisfy itself that the claim was
false or vexatious to the knowledge of the party who put it forward and
that the interests of justice require the award of such compensatory
costs. In the present case, no claim has been advanced by the appellant
that the claim filed by the respondents is false or vexatious, therefore,
the bar in Section 35A is not applicable. Accordingly the issue is
answered.
31. In re Issue No. 5 — It is the case of the appellant that the claim for
interest on costs is not recognized in the Indian law. It is to be noted that
matters of procedure are to be governed by the lex fori, whereas the
matters of the substance are governed by lex causae. In this case, the
question whether the interest on sum of decree of costs to be executed in
India is a matter of substance as the interest on decree is a substantive
right of the decree holder and does not concern itself with the procedural
law of the forum.
32. The appellant relied upon Section 35 of the CPC which enables Courts in
India to impose litigation costs at the discretion of the Court. However,
there is no provision under the CPC or the Interest Act, 1978 which
permits imposition of interest on litigation costs. Further tried to impress
upon that the amended Section 35(3) of the CPC permitted a Civil Court
to grant interest on costs. The unamended Section 35(3) stated as
follows:
The Court may give interest on costs at any rate not
exceeding six per cent per annum, and such interest shall be
added to the costs and shall be recoverable as such.
This Provision was consciously omitted in 1956 (pursuant to Act 66 of
1956). In view of the deletion of Section 35(3) of the CPC, it is argued
that grant of interest on costs is no longer recognized under India law.
33. In this context, it is educative to read the following comments made in
the Debate on the Bill against the deletion of Section 35 (3), by Hon’ble
Member of Lok Sabha Shri Tek Chand;
“..In this connection, a reference has been made to section
35, sub-section (3), which according to clause 3 of the Bill, is
to be omitted. Not that I have usurious propensities, but I do
not like this provision. It is true that there should not be any
profiteering by the people; I concede that, but there are
instances when the costs amount to five figures or more,
and there is no reason why, when an unsuccessful party is
subjecting the successful party not only to a long dilatory
and unending dispute, but also to frivolous and vexatious
litigation whereby he is out of pocket to the tune of several
thousands, the law or the legislature should be so solicitous
that such person should not pay interest, if he does not
propose to pay or if he intends to delay the payment of the
costs. One unfortunate and unhappy feature of
administration of civil law in our land, is apart from delays
and objections of frivolous and vexatious nature, justice is
made available, if at all, at a very high and exorbitant price”.
34. The Hon’ble Member of Lok Sabha thus articulated that omitting
sub-section (3) would encourage delay in realization of decree costs. A
reference to the Report of Law Commission and the views expressed in
Debate on the Bill, as extracted in the Law Commission Report (supra),
would indicate that the consequences of deletion of sub-section (3) of
Section 35 were very much considered by the Parliament. When the idea
of deletion is not to encourage interest on costs as a source of income to
the litigants, the Parliament did not choose positively to prohibit interest
on costs by inserting suitable clause in Section 35.
35. It is to the reciprocal advantage of the Courts of all nations to enforce
foreign rights as far as practicable. To this end, broad recognition of
substantive rights should not be defeated by some vague assumed
limitations of the Court. When substantive rights are so bound up in a
foreign remedy, the refusal to adopt the remedy would substantially
deprive parties of their rights. The necessity of maintaining the foreign
rights outweighs the practical difficulties involved in applying the foreign
remedy. In India, although the interest on costs are not available due to
exclusion of Section 35(3), the same does not mean that Indian Courts
are powerless to execute the decree for interest on costs. Indian Courts
are very much entitled to address the issue for execution of the interest
amount. The right to 8% interest as per the Judgments Act, 1838 of UK
can be recognized and as well as implemented in India.
36. Therefore, we are of the considered opinion that the Execution Petition
filed by the Respondents for execution of the order dated 19th October,
2006 passed by the English Court is maintainable under the relevant
provisions. Therefore, we do not find any reason to interfere with the
impugned order. Resultantly, the appeal is dismissed with costs.
……………………………………J.
(A.K. SIKRI)
NEW DELHI, ……………………………………J.
DECEMBER 09, 2016 (N.V. RAMANA)
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