M/S ALCON ELECTRONICS PVT. LTD. Vs. CELEM S.A. OF FOS 34320 ROUJAN, FRANCE & ANR.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 10106 of 2016, Judgment Date: Dec 09, 2016
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10106 OF 2016
ARISING OUT OF
SPECIAL LEAVE PETITION (CIVIL) NO. 19791 OF 2013
M/S ALCON ELECTRONICS PVT. LTD. ...APPELLANT
VERSUS
Celem s.a. OF fos 34320 ROUJAN, FRANCE & ANR. ..RESPONDENTS
JUDGMENT
N.V. RAMANA, J.
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.
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.
The appellant made following submissions assailing the Judgment of the
Courts below-
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).
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.
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.
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.
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.
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.
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.
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.
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.
We have heard the learned counsel on either side at length and perused the
record. The following issues fall for our consideration:
Whether the order passed by the Foreign Court falls within the Exceptions
to Section 13 of the CPC?
Whether the order passed by the Foreign Court amounts to a “decree” and the
same is executable?
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?
Whether interest on costs would fall within the ambit of Explanation 2 of
Section 44A of CPC?
Whether the interest on costs can be executed in India in view of deletion
of Section 35(3) of CPC?
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 pay the costs of the
application which was summarily assessed at a sum of £ 12,429.75.
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—
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 judgment 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.
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.
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.
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.
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.
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.
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 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...”
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.
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—
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.
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.
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.
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.
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.
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.
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.
Except where specifically provided by the statute or by rules of the Court,
the costs of proceedings are in the Court’s discretion.
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”.
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.
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 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.”
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.
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.
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 pecuniary 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.
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.
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.
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.
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”.
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.
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.
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)
-----------------------
[1] AIR 2001 SC 2134
[2] 2 PEIR B-28 (1988)
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