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The State of Maharashtra Vs. Czechoslovak Airlines - Court Judgment

LegalCrystal Citation
CourtMumbai High Court
Decided On
Case NumberCriminal Revision Application No. 592 of 1976
Reported in(1978)80BOMLR495
AppellantThe State of Maharashtra
RespondentCzechoslovak Airlines
international law - application of principle of sovereign immunity--scope and extent in indian--civil procedure code (v of 1908), section 86.;the czechoslovakian airlines and its general manager were sought to be prosecuted for violation of the payment of wages (air transport services) rules, 1968 for non-maintenance of muster roll and wages register at the establishment.;the respondents contended that the airlines was a department of the czechoslovakian government which could enjoy immunity of a foreign sovereign before courts in india, that the general manager could equally claim that protection, and that though the activity complained of was commercial it was included in the immunity enjoyed by a foreign sovereign state as per principles of international law.;the trial magistrate.....dighe, j.1. this revision application raises a question of international law, regarding the scope and extent in india, of the application of the principle of sovereign immunity.2. the state of maharashtra, represented by labour enforcement officer (central)-i, government of india, department of labour and employment, bombay, filed a complaint against m/s. czechoslovak airlines, as accused no. 1 and its general manager, mr. m. vopravil, as accused no. 2, under rule 21 of the payment of wages. (air transport services) rules, 1968, for non-maintenance of muster roll at the establishment and wages register at the establishment, as required by the rules. even before service of the summons, the accused no. 2 appeared before the learned chief metropolitan magistrate, taking cognizance of the.....

Dighe, J.

1. This Revision Application raises a question of International Law, regarding the scope and extent in India, of the application of the principle of sovereign immunity.

2. The State of Maharashtra, represented by Labour Enforcement Officer (Central)-I, Government of India, Department of Labour and Employment, Bombay, filed a complaint against M/s. Czechoslovak Airlines, as accused No. 1 and its General Manager, Mr. M. Vopravil, as accused No. 2, under Rule 21 of the Payment of Wages. (Air Transport Services) Rules, 1968, for non-maintenance of Muster Roll at the Establishment and Wages Register at the Establishment, as required by the Rules. Even before service of the summons, the accused No. 2 appeared before the learned Chief Metropolitan Magistrate, taking cognizance of the complaint and gave an application asserting that Czechoslovak Airlines is a State owned enterprise of the sovereign State of Czechoslovakia, the Government of Czechoslovak enjoyed full and complete immunity of exemption from the jurisdiction of the municipal Courts of this country and therefore the order for issuing of summons against the accused No. 2 be set aside.

3. According to that application, the enterprise viz., Czechoslovak Airlines vested in the, Czechoslovak Socialist Republic and under the Czechoslovak Laws, there did not exist any private enterprise in that country and that the Airlines were run and controlled by the State of Czechoslovakia. All the aircrafts and other properties were of the absolute ownership of the sovereign State of Czechoslovakia and operating under the direct supervision and control of the Government of Czechoslovakia through its governing body.

4. This claim for complete immunity or exemption on the basis of the accused being a department or a part of the Government of Czechoslovakia, was opposed by the prosecution. It was contended that the Airlines is a commercial concern and the General Manager of that concern was the employer within the definition of Rule 2(1) of the Payment of Wages (Air Transport Services) Rules, 1968, so that the immunity from the process of municipal Courts was not available.

5. The learned trial magistrate observed that there was no dispute that the State of Czechoslovakia is an independent sovereign State recognised by the Government of India. He also observed that it was not in dispute that the accused No. 1 is an enterprise, wholly owned by the State of Czechoslovakia. This latter observation, however, is seriously denied by Mr. Raja Bhonsale, the learned Public Prosecutor, appearing for the State. According to the learned Magistrate, the offence was not alleged to have been committed by the accused No. 2 in his individual capacity, therefore, his responsibility was only that of a Manager or a representative of the accused No. 1. The learned Magistrate upheld the contention of the accused that there was an absolute sovereign immunity under International law. He relied upon the decision reported in R.N. Airline Corporation v. Monorama : AIR1966Cal319 . According to him., the same principle was accepted by the Bombay High Court in its decision in G.D.R. v. Dynamic Industrial Etc. (1970) 73 Bom. L.R. 183. He discarded the contention that the principle of sovereign immunity should not be applied to commercial transactions and actions like the present case, arising out of such transactions. He therefore, discharged the summons issued against the accused and the complaint was dismissed. Aggrieved by that decision, the State of Maharashtra has come in revision.

6. Mr. Bhonsale for the State, contended that there was no convincing proof that the accused No. 1, Czechoslovak Airlines was a department of the Czechoslovakia State Government and that the Manager employer-the accused No. 2, had not even craved any immunity for himself. According to him, the burden of proving the sovereign immunity lay upon the department claiming it. The same was not discharged. At any rate, it was said that it was an error to hold that the actions arising out of commercial transactions of a foreign State, were also excluded from the purview of the Courts of this land.

7. Mr. Pamnani, the learned advocate for the opponents, disputed the proposition that there was no evidence before the Court for concluding the status of the respondents. He relied upon certificate exh. A, given by the Acting Consul General of the Czechoslovak Socialist Republic, as well as on the affidavit filed by the respondent No. 2. During the arguments, he also produced a certificate dated July 26, 1977, given by Charge d'Affairs of the Czechoslovak Socialist Republic in India. He relies upon the agreement passed between the two countries and urged that there was enough evidence for coming to the conclusions that the respondent No. 1 is a department of the Czechoslovakia Government or an extended arm, enjoying immunity available to the Czechoslovak State under the principles of International law.

8. He disputed the proposition that such immunity did not cover commercial transactions, according to the law applicable in India. He also contended that as a matter of fact, the breach complained of, had nothing to do with the commercial transactions and hence the learned trial Magistrate was right in dismissing the complaint.

9. The points that arise for determination, in this application, are therefore, three-fold. In the first place, we must determine whether the respondent No. 1 Czechoslovak Airlines is a department of Czechoslovakia Government which could enjoy the immunity of a foreign sovereign State, secondly whether the respondent No. 2, the General Manager of the Airlines could equally claim that protection and thirdly, whether the activity complained of is a commercial activity and whether the same is not included in the immunity enjoyed by a foreign sovereign State as per the principles of International law.

10. There is no dispute that the State of Czechoslovakia is a foreign State enjoying the immunities available to a sovereign State under the International law. My attention was invited by Mr. Pamnani to 108 at page 255, eighth edn. of International Law, a Treatise by L. Oppenheim. The author has given a list of States, which are at present International Persons. Czechoslovakia figures as a State in Europe. Consequently, whatever immunity a foreign sovereign State enjoys in India, in actions filed in the Courts in India, would surely be enjoyed by the State of Czechoslovakia. The main question for consideration however, is whether the respondent No. 1-Czechoslovak Airlines can also enjoy such immunity and that can happen only if it is a department of that Government or extended arm of that Government. The claim pressed forward in this Court is on the basis of it being a department of the Government.

11. In Krajina v. The Tass Agency [1949] 2 All E.R. 274, the Court of Appeal was concerned with the question of immunity claimed by a department of a sovereign State. The case also speaks about the burden of proving a separate legal existence. That was a suit where the plaintiff had claimed damages for an alleged libel appearing in a weekly newspaper published by the Tass Agency. That Agency contended for immunity on the ground that they were a department of the Soviet State. The decision in appeal is summarised as follows:

Held: (i) having regard to the certificate of the ambassador that the Tass Agency was a department of the Soviet State, the burden, of disproving that the agency constituted such a department was on the plaintiff; the question must be decided by Russian law; and the contents of the particulars under the Registration of Business Names Act, 1916, did not establish that the agency was an independent corporation liable to suit in the English courts;

(ii) although the Soviet statute provided that the agency should enjoy all the rights of a juridical person and the Soviet Ambassador had certified that the agency had the rights of a legal entity, no evidence was before the court to show what were the essential requisites of a separate juridical existence under Soviet law;

(iii) even if the agency was a State department having a separate entity, it did not follow that the Soviet government, by procuring its incorporation, had deprived it of the right to assert the immunity normally attaching to a department of a foreign State under international law, and, accordingly, the appeal must be dismissed.

12. Mr. Pamnani, in this connection relied upon the passage in Cheshire's Private International Law, ninth edn., p. 106, under the heading 'Proof of sovereignty.' It is as follows:

The status of a foreign sovereign is a matter of which the court takes judicial notice, that is to say it is a matter that the court is either assumed to know or to have the means of discovering without embarking upon a contentious inquiry. Where it is doubtful whether a person enjoys sufficient independence to entitle him to immunity, as, for instance, in the case of a ruler in Malaya or in a case after the Indian Independence Act 1947 of a former ruler of an independent State in India, the court must apply in the normal case to the Secretary of State for Foreign and Commonwealth Affairs. The answer is final and conclusive and cannot be questioned either by the parties or by the court.

13. It will have to be realised at once that Czechoslovakia State under its name is not a party to our proceedings, it is the Czechoslovak Airlines that is the party and the effort must be made to find out whether the Czechoslovak Airlines is a department of the government so that they are entitled to the same immunity as of a foreign sovereign. A reference to the agreement passed between the Government of India and the Government of Czechoslovak Republic relating to the Air Service, a copy of which is on record, would show that the contracting parties mutually granted the rights specified in that agreement. Fair and equal rights for the operation of Air Service between the territories of the contracting parties were given. There is no clause directly, mentioning that the Czechoslovak Airlines was a department of the Government of Socialist Republic of Czechoslovakia. In the Court below, the letter dated September 24, 1975, addressed by the Acting Consul General, Bombay, to the Chief Metropolitan Magistrate, Bombay, was produced. The Acting Consul General stated that Czechoslovak Airlines is a State owned organisation of the Czechoslovak Socialist Republic licensed under the Czechoslovak laws to provide air transport. He confirmed that the organisation was under the direct control of the Ministry of Transport of the Government of the Czechoslovak Socialist Republic. The affidavit of the respondent No, 2 is much in the same way. We have no communication from our Ministry of External Affairs or no certificate obtained by the respondents from the appropriate authority of our Government.

14. Mr. Pamnani however, relies upon other documents; one is the translation of the original Czechoslovak writing purporting to be the promulgation of a new organisation for the Civil Air Carriage Service promulgated by the Ministry of Transport of that country. It is dated July 25, 1956. Some measures are announced under that writing for the new organisation of the Civil Air Carriage Service. Section 3, Clause (5) provides as follows:

For performing the air carriage, other aviation activities for special purposes and repair service in aviation, I do hereby constitute, within the purview of Section 2, Sub-section 2, of the Government's Ordinance Number 44/1954, of the Collection of Laws, an organization/a body corporate/, to exist under the said Ordinance on the organization of public carriage service within the powers vested in the Ministry of Transport, as from the 1st August 1956, under the denomination of 'CESKOSLOVENSKE AEROLINE' i.e. Czechoslovak Airlines/, which are to be referred to hereinafter as the 'Corporation' only, and shall be located in Prague.

15. A reading of this document would therefore show that the Czechoslovak Airlines was constituted as a corporation.

16. Another document handed over to me is the copy of the statutes of the corporation known as Czechoslovak Airlines issued by the Federal Ministry for Transport. It is dated October 8, 1973. It relates to the Articles of Association of the Corporation called and styled 'Ceskoslovenske Aeroline/Czechoslovak for: Czechoslovak Airlines'. The first four clauses of Article No. 1, look material. They are as follows:

(1) The Czechoslovak Airlines/CSA/is a Corporation which was established by the Ordinance No. 35 mn of the Minister of Transport issued under date the 25th day of July 1956, to take and have legal effect as from the 1st day of August 1956.

(2) The Corporation known as Czechoslovak Airlines/hereinafter briefly called 'the Corporation'/is a national economic corporation whose activities are under the direct and immediate control and supervision of the Federal Ministry for Transport.

(3) The Corporation is an independent Corporate Body with registered Offices and place of business situate in Prague.

(4) The Corporation carries on its activities in an autonomous independent manner and is responsible for its liabilities in its own proper name; the corporation shall not be held responsible for any liabilities of the Government nor for those of other organizations.

17. From these documents there should be no doubt in the mind that the respondent No. 1 is a corporation, established for the purpose of controlling and looking to the Air Transport in the country of Czechoslovakia as well as in other countries. Now it is a little difficult to find out, the status of a foreign corporation to ascertain whether it is a limb of the Government, it is an ulterior arm or a department so as to recognise the same immunity and privileges as of a foreign sovereign. The position is very well summarised at p. 108 of Cheshire's Private International Law, ninth edn. (p. 108).

A difficult question arises when an action is brought against a corporation, such as the United States Shipping Board or the Polish Economic Bank, which claims to be an emanation of a foreign State and therefore entitled to sovereign status. The status of such a defendant body is not one of which judicial notice is possible, nor one upon which a Secretary of State has ever given a certificate. The court must decide the question upon evidence. The onus lies upon the defendant corporation to prove what its position is under its own law, and with regard to this the English courts have taken the view that the best evidence is an affidavit or certificate given by the ambassador of the foreign State in question. An affidavit which declares that the corporation is a department of state is mot, however, conclusive, for it is open to the plaintiff to adduce evidence to the contrary.

18. There are certain exceptions which are listed in the following lines of the Treatise, but so far as our case is concerned, it has got to be borne in mind that on an affidavit, the respondent No. 2 stated that Czechoslovak Airlines was an enterprise of the Czechoslovak Socialist Republic and was State owned organisation. He not only asserted on oath that the enterprise was vested in the Czechoslovak Socialist Republic but he was firm that there does not exist any private enterprise in the Czechoslovak Socialist Republic and that all the enterprises are run and controlled by the State of Czechoslovakia. He further asserted that aircrafts and other properties are of the absolute ownership of the sovereign state of Czechoslovakia and under the direct supervision and control of the Government of Czechoslovakia.

19. There is no evidence going contrary to it. In other words, although it could have been disputed, as has been disputed that the Airlines is a department of Government, on the part of the prosecution, it remains a mere contention whereas on the part of the respondent, there is a statement on oath.

20. Mr. Pamnani also produced during argument two more documents. On the authority of Dynamic Industrial Etc., such documents could be looked into. In this connection it is said:

It is not for the Court to pronounce any opinion on the point whether the Government of India has recognised a foreign Government as a Sovereign State. The Court has to ascertain this fact on the information made available to it by the Government of India, and for that purpose necessary evidence can be allowed to be adduced even at the stage of appeal.

21. One of the documents is a copy of the Government of India Ministry of External Affairs Notification No. 460(6)DIII/77 dated July 13, 1977. The Notification acknowledges receipt of the letter intimating that Mr. Jaromir Nehera, Counsellor, took charge of his duties as Charge d' affairs. The other document is a certificate in original given by Jaromir Nehera, Charge d' affairs, under his seal, certifying that the Czechoslovak Airlines is a state-owned organization of the Czechoslovak Socialist Republic and confirming that it is under the direct control of the Ministry of Transport of the Government of the Czechoslovak Socialist Republic.

22. Looking to this certificate and the documentary evidence earlier referred to, and in the absence of any contrary evidence coming from the prosecution, I think, I should be ill-advised in not holding that the respondent No. 1 M/s. Czechoslovak Airlines is a department of that Government, The judgment would therefore proceed on the basis of the recognition of that status.

23. More important question however, would be regarding the scope and extent of the immunity enjoyed in India by the foreign State or its department, that is to say whether that immunity is an absolute immunity so as to include the commercial activities or whether the immunity does not cover such activities. There is no dispute that the Airlines in India are operated for carrying freight and passengers by charging money and such transactions are ordinarily commercial transactions. The respondent No. 1, therefore, can easily be said to be indulging in commercial activities. However, Mr. Pamnani argues that restrictive immunity as understood in International law relates to commercial transactions with a trader whereas the non-maintenance of any Wages Register or non maintenance of Muster Roll, does not constitute such commercial transactions. I suppose, there is a fallacy in his argument. Czechoslovak Airlines under the agreement referred to above, has to work in conformity with the laws of this country. They provide for maintenance of such books by any employer who undertakes commercial activities of the nature referred to in the rules. Separating the particular action of keeping a book or a register from general, total sphere of action of running the Airlines on commercial basis, would be of no avail in saying that a particular act is not a commercial activity. The entire commercial activity is controlled by the statuses and maintaining the books is only an ancillary facet of the same. Therefore, there would be no merit in the contention that non-maintenance of the registers is not a commercial activity. It is an activity envisaged under the entire sphere of commercial activities.

24. Before examining the extent of the privilege as available in the Courts in India, I might dispose of the contention that the respondent No. 2 has not prayed for any such privilege. The respondent No. 2 has been impleaded in the complaint as the Manager of the respondent No. 1 Airlines and the alleged offence has been committed by the Airlines in not maintaining the registers. The respondent No. 2 happens to be in the employment of respondent No. 1. According to him, his acts therefore, must be looked upon as the acts of a representative or of an agent of the respondent No. 1. In case the respondent No. 1 could successfully ask for the non-prosecution then surely the respondent No. 2 would be entitled to that benefit. It is not an independent offence which is committed by the respondent No. 2 on his own responsibility. At least there is no such material placed on record. Consequently the immunity available to respondent No. 1 would equally protect the respondent No. 2 in this case.

25. It is the contention of Mr. Pamnani for the respondents that a foreign sovereign has an absolute immunity inclusive of the commercial activities. Such immunity is available to a foreign sovereign in England and that law has been followed in India. There is no change whatsoever made by any pronouncement of this Court and as such it may be futile to speak of any restrictive immunity.

26. As against this, Mr. Bhonsale, for the State, contends that even though our Courts have followed English Law, regarding sovereign immunity, although with the exception embodied in Section 86 of the Code of Civil Procedure, the English Courts have now taken a different view, so that we should also take a different view and that is, that the commercial transactions are not included in that immunity. Mr, Bhonsale relies upon the judgment reported in Trendtex Corporation v. Central Bank [1977] 2 W.L.R. 356, where the majority judgment recognises the principle of restrictive immunity, thus, excluding commercial transactions from the privilege of the immunity available to the foreign sovereign. As against this, Mr. Pamnani con-tends that there are precedents in India speaking of absolute immunity. The same was recognised by the High Court of Calcutta in deciding the case of R.N. Airline Corporation v. Monorama and also by our High Court in G.D.R. v. Dynamic Industrial Etc. He also relies upon the decision in Ali Akbar v. United Arab Republic : [1966]1SCR319 , where the effect of Section 86(1) of modifying to a certain extent the doctrine of immunity recognised by International law has been taken into consideration.

27. On the question of understanding the doctrine of immunity from jurisdiction, we can usefully refer to 115a of International Law by L. Oppenheim, vol. 1, where we find the following observations (p. 264):

The third consequence of State equality is that-according to the rule par in parem non habet emporium-no State can claim jurisdiction over another. Therefore, although States can sue in foreign courts, they cannot as a rule be sued there, unless they voluntarily submit to the jurisdiction of the court concerned. This rule applies not only to actions brought directly against foreign States, but also to indirect actions, as when, for instance, a suit in rem is brought against a vessel in the possession of a foreign State. Although, in giving effect to this rule, courts occasionally refer to the 'comity of nations' as the basis of their decision, the principle of immunity of sovereign States from the jurisdiction of the courts of other States has in fact been treated by courts of most countries as a rule of International Law.

28. Cheshire's Private International Law refers to the famous observations of Lord Atkin in defining 'The immunity of sovereign personally.' This is what he says under the head: Sovereigns and Sovereign States, vide p. 98, ninth edn.:

In accordance with the maxim par in parem non habet imperium, the English courts are fully committed to the view that they will not exercise jurisdiction over the person or the property of a foreign sovereign State unless it is willing to submit to process. The law has been reduced to two propositions by Lord Atkin:

The first is that the courts of a country will not implead a foreign sovereign, that is, they will not by their process make him against his will a party to legal proceedings whether the proceedings involve process against his person or seek to recover from him specific property or damages.

The second is that they will not by their process, whether the sovereign is a party to the proceedings or not, seize or detain property which is his or of which he is in possession or control....

I draw attention to the fact that there are two distinct immunities appertaining to foreign sovereigns: for at times they tend to become confused: and it is not always clear from the decisions whether the judges are dealing with the one or the other or both. It seems to me clear that, in a simple case of a writ in rem issued by our Admiralty Court in a claim for collision damage against the owners of a public ship of a sovereign State in which the ship is arrested, both principles are broken. The sovereign is impleaded and his property is seized.

29. The learned author proceeds to elaborate the personal immunity showing that there is no limit to the immunity in the case of a sovereign personally. Regarding proprietary immunity four cases have been mentioned, as undoubtedly providing for the application of the doctrine of immunity : one is when the sovereign is admitted owner of the property; the other is when the sovereign is in de facto possession of the property; the third is when the sovereign though not in actual possession, is in control of the property and the fourth is when the sovereign is entitled to immediate possession.

30. The learned author refers to the difficulty felt when a sovereign intervenes in an action between third parties and the limits of recognising immunity in such a case have been discussed. We are, however, not concerned with that aspect in the present case.

31. A look at the decision in R.N. Airline Corporation v. Monorama would show that the case in Calcutta arose when the plaintiff sought to recover damages against the corporation by reason of the accidental death of the pilot employed by the Airlines in question. After considering the procedure for a sovereign to claim immunity, the two propositions laid down by Lord Atkin in Compania Naviera Vascongado v. S.S. Cristina [1938] A.C. 485, looked into by Cheshire and quoted above, have been noted with approval. It is further observed that there has been some difference, in the practice of nations as to possible limitations of the second principle as to whether the immunity extends to properties, only used for the commercial purposes of the sovereign or to personal and private. Lord Atkin's views 'in this country it is well settled that it applied to both', have been quoted. The case is decided recognising immunity even for the commercial transactions.

32. It is however, to be remembered that Section 86 of the Code of Civil Procedure, which provides for taking a consent of the Central Government before proceeding against a foreign sovereign in a civil Court, thereby implying that wherever such consent is granted, there cannot be any claim for sovereign immunity, has been interpreted as not abrogating the rules of private International law as to sovereign immunity. The provisions of the Code are viewed as an additional direction or privilege to a foreign sovereign, providing an immunity from being sued in the municipal Courts of this country without the previous permission of the Central Government being obtained to the institution of such suit.

33. This latter part relating to the interpretation of Section 86, fell for consideration at the hands of the Supreme Court and the Supreme Court has not approved the construction put by the Calcutta High Court, in deciding Ali Akbar v. United Arab Republic. A suit for damages was filed in the Calcutta High Court against the United Arab Republic, without obtaining the consent under Section 86 of the Code of Civil Procedure. In holding such a suit as not maintainable, the observations in para. 30 are as follows (p. 237) would be legitimate to hold that the effect of Section 86(1) is to modify to a certain extent the doctrine of immunity recognised by International Law. This section provides that foreign States can be sued within the municipal Courts of India with the consent of the Central Government and when such consent is granted as required by Section 86(1), it would not be open to a foreign State to rely on the doctrine of immunity under International Law, because the municipal Courts in India would be bound by the statutory provisions, such as those contained in the Code of Civil Procedure. In substance, Section 86(1) is not merely procedural; it is in a sense a counter-part of Section 84. Whereas Section 84 confers a right on a foreign State to sue, Section 86(1) in substance imposes a liability on foreign States to be sued, though this liability is circumscribed and safeguarded by the limitations prescribed by it. That is the effect of Section 86(1).

34. The principles of International law therefore, regarding the absolute immunity, stand modified to that extent and where the consent is obtained, the immunity is abrogated.

35. It is worthwhile noticing that in the year 1966, when in the case of the R.N. Airline Corporation the Calcutta High Court decided the scope and extent of the immunity, the Supreme Court declined to express opinion on the question whether the respondents-The United Arab Republic-were justified in claiming absolute immunity under International Law. There is therefore no authoritative pronouncement from the Supreme Court, that the law enunciated by the Calcutta High Court in R.N. Airline Corporation v. Monorama, is in accordance with the principles of International Law.

36. Mr. Pamnani for the respondents, however, says that the ratio of the Calcutta High Court judgment has been approved and adopted by our Bombay High Court in deciding the Dynamic Industrial Etc. Fertilisers were supplied to defendant No. 1 Corporation alleged by the plaintiff himself to be the department of the defendant No. 2-German Democratic Republic-and when the German Democratic Republic claimed sovereign immunity the question for decision happened to be whether the German Democratic Republic which had been recently formed, was then recognised as a sovereign State by Indian Government.

37. The question whether such immunity could be claimed by a Notice of Motion, came to be discussed at length particularly, on the background of an earlier Chamber Summons, given for framing preliminary issues, seeking to determine whether the defendant No. 2 could enjoy the immunity and on the background that the Chamber Summons as well as the appeal over it was dismissed. The method of presenting a motion for the prayer that the suit filed against the defendant No. 2 be dismissed, was looked upon as a proper way of agitating the question though the alternative prayer in the same motion for the decision of the preliminary issues which were in the same terms as in the earlier Chamber Summons, was looked upon as a prayer barred by res judicata.

38. Thereafter the learned Counsel for the defendant No. 2 was allowed to argue the question whether his client was entitled to immunity as a foreign sovereign State, thus showing that the suit filed against him could not at all be proceeded. This contention of the counsel for the defendant No. 2 was met with two objections, first, that the prayer could not have been made in a Notice of Motion but it ought to have been raised only at the time of the trial of the suit and secondly, by reason of Section 86 of the Code of Civil Procedure, the privilege of claiming immunity as a foreign sovereign State even to the extent that may be available under the principles of international law was not available in India. The first contention was negatived. We may not be concerned with the reasons for it. But in dealing with the second contention viz., the doctrine of immunity of a foreign sovereign State as available under International law is not available in India, the learned Judges proceeded to consider what was the position of that claim in International Law.

39. From the observations at page 193 of the report, we find that the learned Judges looked into the doctrine of immunity as understood in England viz., that a foreign sovereign State cannot be sued in the municipal Courts at England and that the Courts in England will not inquire into the validity of the acts of a foreign government which has been recognised by the government of England. The second principle deduced was that recognition of the government de jure or de facto did not make any difference.

40. Some of the cases recognising the doctrine of immunity have been looked into. The first is a judgment of the House of Lords in, Duff Development Co. v. Kelantan Government [1924] A.C. 797, holding the settled practice of the Courts in England to take the judicial notice of the status of any foreign government and for that purpose, in any case of uncertainty, to seek information from the Secretary of State. The second case looked into is a case decided by the House of Lords, The Arantzazu Mendi [1939] A.C. 256. This case also refers to the procedure to be followed for ascertaining whether the foreign State is a Sovereign State by directing a letter to be written to the foreign office.

41. The third case looked into is of the House of Lords Carl Zeiss Stiftung v. Rayner & Keeler Ltd. (No. 2) [1967] A.C. 853. This case also refers to the obtaining of a certificate and interpreting it. Page 195 of the report shows that two points were looked into. The first point is that the Court has to reach a decision on the relevant information made available to the Court from the Government of the country of that Court. Pertinent observations in this connection are:.We cannot reach the same conclusion as was reached by the House of Lords merely on the basis of the information supplied in that case to the English Court by the British Government. What we will have to rely upon is the information supplied to this Court by the Government of our country.

42. It must be remembered that the underlying principle would apply even in interpreting the Rule of International law regarding sovereign immunity and that when our Courts are not bound by the decisions of the Courts in England, we need not adopt blindly what is laid down as the law in England.

43. The second point noticed is that it is the principle of International law under which the German Democratic Republic had made a claim to immunity. It has been observed that it is a well known fact that the same foreign government may be recognised by a second government and may not be recognised by a third government, and that the point which was to be considered was whether the defendant No. 2 was recognised as a foreign sovereign State by our country.

44. In this manner, after devoting attention to the procedure followed by other Courts for the purposes of determining the status, the learned Judges have observed as follows (p. 195):

The principles of International Law relating to immunity accepted by England as seen above have also been recognised in the United States of America.

45. The judgment then proceeds to notice some of the decisions of our country on the point. In this respect what is stated on the same page is as follows:

In N. Masthan Sahib v. Chief Commr., Pondicherry : AIR1962SC797 , the Supreme Court considered some of the above referred to English decisions, and particularly that reported in Duff Development Co. v. Kelantan Government and The Arantzazu Mendi, and stated that the proposition laid down in the English decisions that a conflict is not to be envisaged between the executive Government and the judiciary appeared to the Supreme Court to rest on sound reasoning and except possibly in extreme cases the statement of the Government must be held binding on the Court and should be given effect to by it.

46. After elaborately looking into the procedural aspect of the matter, the judgment proceeds to say that that was the convenient stage to see what well-known authorities on International law have to say as regards the doctrine of immunity. To my mind, the expounding of that doctrine starts from this point onwards. The statements of law obtainable in Cheshire on International Law and of L. Oppenheim's book on International Law, already cited above are quoted. Then follows the citation from Dicey on 'The Conflict of Laws', eight edn., 1967, (p. 126). It runs as follows:

Sovereign immunity is not limited to actions arising out of the foreign sovereign's official acts but extends also to his commercial activities and even to personal contracts like contracts to marry. No distinction is drawn between acta imperiland acta gestation is. Such a distinction, though it is clearly very difficult to draw, is discernible in the practice of many other States, and it may well be that English Courts have extended the doctrine of sovereign immunity considerably further than international practice strictly requires. The results have proved unfortunate and have led to the widespread dissatisfaction.

(Italics ours).

47. The further observations refer to the modern trend in respect of making an exception in the case of commercial activities; the law is looked upon as being in a very fluid state. It is concluded that in England the doctrine of immunity has yet not been curtailed. The relevant passage at p. 196 is as follows:

It may be stated that in recent years many States embark on industrial business and commercial activities which are not confined only to their own territories but extend beyond their territories. Modern writers on International Law have expressed their own opinions as to whether the doctrine of immunity available to a foreign Sovereign State should be made available in respect of such transactions which are purely of a commercial nature. The point about making exception in the case of commercial activities, is, to say the least, in a very fluid state and it is very likely that it will take considerable time to boll down to a well recognised principle of International Law. Mr. Nariman did invite our attention to some other passages, but, in our opinion, it is not necessary to refer to them. We have already referred to decided cases and some well-known authorities on International Law and it is quite clear that the doctrine of immunity has yet not been curtailed to England so as to exclude the doctrine of immunity from applying to commercial transactions. So far as English Courts are concerned, it is a settled doctrine till it is hereafter revised.

48. Thus, taking into consideration what was the position available in England in the year 1970, when the judgment was delivered, the learned Judges proceeded to say that, that doctrine has already been recognised in India. A reference is made to R.N. Airline Corporation v. Monorama and following observations have been made (p. 196):

If the doctrine which is well established for over a large number of years requires, in view of changed circumstances, to be at all modified, it is highly desirable that the Supreme Court as the highest Court of the land should, m a proper case, lay down the principles.

49. It is in this connection that the learned Judges proceed to say (p. 196):.We, for ourselves, prefer to follow the well-established doctrine.

50. In substance, therefore, the doctrine and its extent as available in English law as then existing, has been looked into the same is taken as the rule of international law and that has been followed.

51. It has to be noticed that the judgment has not to be understood as finding out the English law and make it the law of our land but has to be understood as making the efforts to find out the rule of International law through the medium of English Law and to adopt the same.

52. The judgment then proceeds to find out whether the second defendant-German Democratic Republic was recognised as a sovereign state by India and then concludes at page 198 as follows:

We, therefore, hold that the second defendant is a foreign Sovereign State and is entitled to immunity as claimed by it under the principles of International Law.

53. Incidentally, the Supreme Court judgment in Ali Akbar v. United Arab Republic, on the interpretation of Section 86 of the Code of Civil Procedure, has been looked into and when the Supreme Court speaks about the modifications made, it is said that the word 'modified' shows that the principle of International Law would be applicable in India, but that in its application Section 86 creates an exception. In expounding the same it is said that in International Law immunity is made applicable subject to the exception or exceptions recognised in International Law but that Section 86 creates another exception, the exception being, where the requisite consent is given by the Government of India, no immunity could be claimed.

54. For appreciating the position now available in England of the extent of immunity as well as for knowing the limitations of the principle as understood by the International comity of nations the learned Counsel Mr. Bhonsale relied upon the latest ruling in Trendtex Corporation v. Central Bank. That is a judgment given by Lord Denning M.R., Stephenson and Shaw L.JJ. The question arose when the Central Bank of Nigeria refused to honour the letter of credit given on her behalf in connection with the commercial transaction of supplying cement to Nigeria and took shelter under the doctrine of immunity saying that the bank was a department of the State of Nigeria and was therefore immune from suit. The decision per curiam is as follows:

The modern principle of restrictive sovereign immunity in international law giving no immunity to acts of a commercial nature is consonant with justice, comity and good sense.

55. Lord Denning M.R. and Shaw L.J. went so far as saying that International Law knows no rule of stare decisis. It was the minority view of Stephenson L.J.

that the Court of Appeal is bound by previous decisions to hold that absolute sovereign immunity is a rule of international law until the House of Lords or Parliament declares to the contrary.

56. Mr. Pamnani for the respondents argues that this judgment is not applicable to the facts of our case. It is a foreign judgment by which we are not bound, it can at best have the persuasive effect. We would be governed by the position obtainable in the judgments in R.N. Airline Corporation v. Monorama, of the Calcutta High Court (supra) and of the Bombay High Court in G.D.R. v. Dynamic Industrial Etc. (supra). He also contended that the judgment relied upon by Mr. Bhonsale, showing the change in law in England, was not a unanimous judgment and that it was not a pronouncement of the highest Court of the House of Lords. It was thus, subject to appeal and therefore ought not to be followed. He also referred to the non-adoption by England of the European conventions of 1926 and 1972 thereby suggesting that England has not deviated from the principle of absolute immunity granting the same even for commercial transactions.

57. Even this judgment in my opinion, has to be looked into only to find out what is the prevalent rule of International law rather than for finding out what is the position in England. As is rightly contended by Mr. Pamnani, we are not bound by the decision of the English Courts and if that is so, our efforts should be to trace out the current rule of International Law and to find out if that rule is in conflict with any of the decisions given by this Court, otherwise to rely upon it.

58. It may be reiterated here that our High Court in deciding G.D.R. v. Dynamic Industrial Etc., made efforts to determine the rule of International law, scope of the doctrine of immunity and the extent to which it could be granted. It is true that in deciding that case, it has been held that in England there was absolute immunity, even covering the commercial transaction and no doubt, that principle was followed, but the distinction, and an important distinction for the matter of that, has to be observed and that is that the attempt was not to follow blindly the law as applicable in England but the attempt was to find out what was the rule or the principle of immunity as understood by International law. It is for this reason that a reference is made even to the position obtainable in U.S.A. Incidentally the rule of International Law is taken as coincident with) the rule or principle followed in England and the judgment was based on that finding. That judgment therefore would put us within our bounds in finding out what is the true scope and limit of the principle of sovereign immunity as understood by International comity to-day and if this Court comes to the conclusion that it does not cover commercial transactions, the decision in G.D.R. v. Dynamic Industrial Etc. would not come in the way of this Court in declaring the same and adopting that rule.

59. The judgment in Trendtex Corporation v. Central Bank will be useful in understanding the correct International law on the subject. The decision in Thai-Europe Ltd. v. Pakistan Government [1975] 1 W.L.R. 1485 makes a reference to the conflict of laws regarding sovereign immunity. West Pakistan Agricultural Development Corporation which was subsequently taken over by the government of Pakistan, was sought to be held answerable for demurrage by German owners of a ship and by reason of a clause in the charter party giving jurisdiction in England, suit was filed in England. Pakistan Government claimed immunity and hence the writ was set aside. The appeal was dismissed on the ground that since none of the incidents of the transaction took place within the jurisdiction of England, there could be no exception to the general principle that the Courts would not implead a foreign sovereign. Lord Denning M.R. in interpreting the principle that a judicial decision against the government of a foreign nation could conceivably cause severe international repercussions the full consequences of which the Courts are in no position to predict speaks of certain exceptions, one being that a foreign sovereign has no immunity when it enters into a commercial transaction with a trader in England and a dispute arises which is properly within the territorial jurisdiction of Courts in England.

60. Thereafter we come across the decision in The Philippine Admiral [1976] 2 W.L.R. 214, in which the English Courts have broken the ice and have upheld the principle of restrictive immunity. However that is done in relation to the actions in rent. The important landmark is that the decision in The Parlement Belge (1879) 4 P.D. 129 and on appeal The Parlement Belge (1880) 5 P.D. 197, upon which the doctrine that a sovereign can claim immunity for vessels owned by him even if they are admittedly being used wholly or substantially for trading purposes, was supposed to have been found, came to be authoritatively interpreted. The observations in that respect, at pages 224 and 225 are as follows:

In The Parlement Belge the Court of Appeal said that the court could not exercise jurisdiction over 'the public property of any state which is destined for its public use'; but it did not say that a state-owned vessel engaged wholly or substantially in ordinary commerce must be regarded as property 'destined to its public use'. It was careful to leave that point open.

61. Consequently the ship 'Philippine Admiral' which had engaged itself in minor trade, was denied the claim of immunity.

62. This decision refers to the two conventions, one of April 10, 1926, signed at Brussels by over twenty states, including the United Kingdom and the other signed at Basle on May 16, 1972, by a number of member states of the Council of Europe, The terms of the Article (1) of the former convention as at page 225 are as follows:

Sea-going ships owned or operated by states, cargoes owned by them, and cargoes and passengers carried on state-owned ships, as well as the states which own or operate such ships and own such cargoes shall be subject, as regards claims in respect of the operation of such ships or in respect of the carriage of such cargoes, to the same rules of liability and the same obligations as those applicable in the case of privately-owned ships, cargoes and equipment.

63. The latter convention has the following preamble (vide p. 231):

The member states of the Council of Europe, signatory hereto. Considering that the aim of the Council of Europe is to achieve a greater unity between its members;

Taking into account the fact that there is in international law a tendency to restrict the cases in which a state may claim immunity before foreign courts;;

Desiring to establish in their mutual relations common rules relating to the scope of the immunity of one state from the jurisdiction of the courts of another state, and designed to ensure compliance with judgments given against another state;

Considering that the adoption of such rules will tend to advance the work of harmonisation undertaken by the member states of the Council of Europe in the legal field,

Have agreed as follows:.

Although, these conventions are not ratified by England, they have an important bearing in knowing international thought and in interpreting the rule of International Law.

64. Mr. Pamnani's argument on the basis of the non-adoption of these conventions by England that England has not deviated from the doctrine of absolute immunity would only indicate the conservative outlook of England on the matter and at best show the fluid state of law in England. It cannot wipe off the impression of the thinking process of international comity and the understanding between nations on that subject.

65. As remarked in that very decision the shift in world opinion can also be gathered from the 'Tate' letter addressed on May 19, 1952, by J.D. Tate, the acting legal adviser of the State Department, to the then acting Attorney-General of the United States notifying him of a change in the policy of the Department of State with regard to the granting of sovereign immunity to foreign governments. The letter first refers to what it describes as two conflicting concepts of sovereign immunity. According to the classical or absolute theory a sovereign cannot without his consent be made a respondent in the Courts of another sovereign, while according to the newer or restrictive theory immunity is only recognised with regard to acts done jure imperil as opposed to acts done jure gestation is. The letter goes on to list those countries whose Courts accepts the absolute or the restrictive theory respectively-including in the former class the United States itself and the British Commonwealth-pointing out that in many of the countries whose Courts still applied the absolute theory academic writers tended to support the restrictive theory and that a number of those countries were in fact parties to and had ratified the Brussels Convention of 1926. It refers to the fact that the United States itself does not claim immunity from suit in foreign Courts where it would not be entitled to do so according to the restrictive theory, and says that it will hereafter be the policy of the State Department to follow the restrictive theory of sovereign immunity when considering the claims of foreign governments for the grant of such immunity.

66. In Trendtex Corporation v. Central Bank, Lord Denning M.R. refers to the evolution of the doctrine of immunity, emphasising the basic concept of international law that a sovereign state should not; be impleaded in the Courts of another sovereign state against its will, upon which all have agreed. The learned Judge observes that there has been a complete transformation in the functions of a sovereign State. Nearly every country now engages in commercial activities. It has its department of State or creates its own legal entities which go into the market place of the world. It is said that this transformation has changed the rules of International law relating to sovereign immunity and the absolute immunity is replaced by restrictive immunity. That doctrine gives immunity to acts of governmental nature but no immunity to acts of commercial nature. The learned Judge then refers to a thesis written in 1951 by Sir Hersch Lauterpacht showing that even in 1951 many European countries had adopted the doctrine of restrictive immunity. The learned Judge also refers to the 'Tate Letter' of the year 1952, considered in this judgment earlier. Further on, reference is made to the Privy Council abandoning the absolute theory and accepting the restrictive theory in deciding The Philippine Admiral. The learned Judge feels that the Privy Council should have accepted the restrictive theory even in relation to actions in personam, more so when they have in their judgment in The Philippine Admiral clearly expressed themselves regarding the change in world opinion. That passage at page 232 and 233 is as follows:.the trend of opinion in the world outside the Commonwealth since the last war has been increasingly against the application of the doctrine of sovereign immunity to ordinary trading transactions...their Lordships themselves think that it is wrong that it should be so applied.... Thinking as they do that the restrictive theory is more consonant with justice they do not think that they should be deterred from applying it....

67. Lord Denning M.R. in making out a case for acceptance of the doctrine of restrictive immunity even for transactions in personam, adds,

Such reasoning is of general application. It covers actions in personam. In those action, too, the restrictive theory is more consonant with justice. So it should be applied to them. It should not be retained as an indefensible anomaly. (vide p. 367).

68. The learned Judge then pleads for the recognition of that rule by the European Community observing in that connection at page 368, as follows:

Even if there were no settled rule of international law on the subject, there should at least be one settled rule for the nine countries of the European Economic Community. The Treaty of Rome is part of the law of England. One of the objectives contained in Article 3(h) (see Cmnd. 5179) is to ensure 'the approximation of the laws of member states to the (extent required for the proper functioning of the common market.'

It is one of the functions of the Commission and the Council to issue directives to achieve this approximation: see Articles 100, 101 and 102, I regard the word 'approximation' in the treaty to mean 'harmonisation'.

In view of those provisions, it seems to me that it is the duty of each of the member states-and of the national courts in those states-to bring the law as to sovereign immunity into harmony throughout the community. The rules applied by each member state on the subject should be the same as the rules applied by the others. There is only one acceptable way of doing it. That is by adopting the doctrine of restrictive immunity on the lines I have suggested.

69. The decision of the German Court in Y.M.N. Establishment v. Central Bank of Nigeria (1979) District Court of Frankfurt, on similar point arising out of similar transaction between the same parties where the claim for absolute privilege was rejected, has also been looked into and the modern principle of restrictive immunity has been enunciated.

70. It is interesting to know that although Stephenson L.J. giving a dissenting judgment preferred to wait before setting aside the doctrine of absolute immunity until the House of Lords or Parliament declared to the contrary, his observations are in consonance with the judgment of Lord Denning M.R. thereby unmistakably showing the current of international thought. The learned Judge first takes note of the observations of Lord Cross of Chelsea in The Philippine Admiral which as: quoted at pp. 372-373 are as follows:

There is no doubt...that since the Second World War there has been both in the decisions of courts outside this country and in the views expressed by writers on international law a movement away from the absolute theory of sovereign immunity championed by Lord Atkin and Lord Wright in The Cristina towards a more restrictive theory. This restrictive theory seeks to draw a distinction between acts of a state which are done jure imperil and acts done by it jure gestation is and accords the foreign state no immunity either in actions in personam or in actions in rem in respect of transactions falling under the second head. (p. 228).

71. The learned Judge then considers the decisions of Courts outside his country since the Second World War, and in connection with the movement to establish and recognise restrictive immunity, summaries as follows (p. 373):

This movement had gained a fair amount of ground by 1958 in the courts of many countries, as was demonstrated by the decisions collected by Professor Lauterpacht in the Appendix to his article on 'The Problem of Jurisdictional Immunities of Foreign States' published in the British Year Book of International Law 1951, vol. 28, p. 220, at pp. 250 and following. The decisions reviewed by the Federal Constitutional Court of the Federal Republic of Germany in 1963 in the Claim against the Empire of Iran Case,16 show that by 1958 several countries had accepted and enforced the rule of restrictive immunity.

72. At page 380 of the judgment Stephenson L.J. has spoken of the necessity to keep in step, with the Supreme Court of the United States of America, and to keep in step with the Courts of the countries who have signed the Treaty of Rome, which have followed the principle of restrictive immunity and has concluded his judgment by showing his mind, recognising the change outside England but feeling consistently bound by the decision in The Philippine Admiral. He has expressed himself in the following words, while closing his judgment (p. 381):.But meanwhile I must stand loyally but reluctantly on the old doctrine and the old decisions.

73. In view of this discussion the trend, the purport and the effect of International law, is quite clear. It recognises the principle of restrictive immunity, so that immunity is not available for commercial transactions.

74. If we now, look to the authorities, on the International Law, L. Oppenheim in his Treatise, vol. 1, in 115ad. says as follows (p. 272):

The doctrine and practice of jurisdictional immunity of foreign States and their agencies have been variously-and often simultaneously-deduced from the principles of equality, of independence, and of dignity of States. It is doubtful whether any of these considerations supply a satisfactory basis for the doctrine of immunity. There is no obvious impairment of the rights of equality, or independence, or dignity of a State if it is subjected to ordinary judicial processes within the territory of a foreign State-in particular if that State, as appears to be the tendency in countries under the rule of law, submits to the jurisdiction of its own courts in respect of claims brought against it. The grant of immunity from suit amounts in effect to a denial of a legal remedy in respect of what may be a valid legal claim; as such, immunity is open to objection. The latter circumstance provides some explanation of the challenge to which it has been increasingly exposed-in addition to the circumstance that the vast expansion of activities of the modern State in the economic sphere has tended to render unworkable a rule which grants to the State operating as a trader a privileged position as compared with private traders. Most States, including the United States, have now abandoned or are in the process of abandoning the rule of absolute immunity of foreign States with regard to what is usually described as acts of a private law nature. The position, in this respect, in Great Britain must be regarded as fluid.

75. The learned author has thus, noted what is the rule available in International comity. The views expressed by Cheshire in his book-Private International Law, are to the same effect. To quote vide ninth edn,, p. 105:.The present English doctrine is in fact so out of tune with the times that the failure of the legislature to restrict its field of application is a little surprising. Most legal systems have retreated from the principle of absolute immunity by distinguishing between acta imperil and acta gestations-a distinction that rests upon the nature of the particular act in question. 'What matters is whether the foreign State acts in the exercise of its sovereign power or like a private person.' In the former case alone is immunity allowed. In fact, it would appear that outside the United Kingdom and some Commonwealth countries the doctrine of absolute and unqualified immunity is now recognized only in relatively few States.

76. The English Courts have now gone further in view of the judgment in The Philippine Admiral. Our effort all along has been to find out, what is the International law to be made applicable in India. The principle of restrictive immunity is the prevailing principle and the same ought to be recognised as the rule of international law by this Court. I am unable to interpret the judgment in Dynamic Industrial Etc., as going against it. The Calcutta judgment in R.N. Airline Corporation v. Monorama, cannot in the circumstances of the case, be looked upon as good law. This High Court is not bound by it. I therefore, see no hesitation in holding that the commercial transactions entered into by the two respondents in India, could not be saved by the principle of sovereign immunity. In the circumstances, the judgment of the Court below, cannot be upheld. Hence I pass the following order:

77. The rule is made absolute. The order passed by the Chief Metropolitan Magistrate, Bombay, on September 22, 1976, is set -aside. The case is ordered to be taken on file and the Court is directed to proceed with it in the light of the above judgment.

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