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Deepak Wadhwa Vs. Aeroflot - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtDelhi High Court
Decided On
Case NumberExecution Appeal No. 81 of 1981
Judge
Reported in24(1983)DLT1
ActsCode of Civil Procedure (CPC), 1908 - Sections 86
AppellantDeepak Wadhwa
RespondentAeroflot
Advocates: P.R. Mridual,; R.K. Anand,; A.K. Bhasin,;
Cases ReferredIndrajit Singhji v. Rajendra Singhji
Excerpt:
(i) civil procedure code - section 86--institution of suits against foreign state--transformed principles of international law cannot be incorporated in the statutory provisions of section 86.; (ii) carriage by air act 1972--discussed--there is no provision relating to sovereign immunity--the procedure to be followed in suits is governed by the provisions of the c.p.c. alone.; the question that arose for the consideration of the court was whether the principle of international law as transformed from time to time, relating to sovereign immunity, apply in india in face of the provisions contained in section 86 of the code of civil procedure, 1908. answering the question in the negative,; 1. aeroflot, the soviet airline is an alter ego or organ of the government and the provisions of.....s.s. chadha, j. (1) the question raised in tins case is whether the principles of international law as transformed from time to time about sovereign immunity apply in india in face of the provisions contained in section 86 of the code of civil procedure, 1908. (2) mr. deepak wadhwa, plaintiff/decree-holder obtained from this court on may 28, 1981 an ex-parte decree for the recovery of rs. 4,32,066 with costs against aeroflot (soyiet airlines). he took out on july 22, 1981 the execution of the decree and prayed for the issue of warrants of attachment of the amount lying in the current account no. 30/84011 with state bank of india, main branch, parliament street, new delhi in the name of aeroflot and then calling the amount for payment to the decree-holder. a show cause notice was issued to.....
Judgment:

S.S. Chadha, J.

(1) The question raised in tins case is whether the principles of International Law as transformed from time to time about sovereign immunity apply in India in face of the provisions contained in Section 86 of the Code of Civil Procedure, 1908.

(2) Mr. Deepak Wadhwa, plaintiff/decree-holder obtained from this Court on May 28, 1981 an ex-parte decree for the recovery of Rs. 4,32,066 with costs against Aeroflot (Soyiet Airlines). He took out on July 22, 1981 the execution of the decree and prayed for the issue of warrants of attachment of the amount lying in the current account No. 30/84011 with State Bank of India, Main Branch, Parliament Street, New Delhi in the name of Aeroflot and then calling the amount for payment to the decree-holder. A show cause notice was issued to the judgment-debtor who filed an application, being E.A. 174181, for declaring that the suit instituted by the decree-holder was incompetent, invalid and untenable and the decree is non-est. inexecutable and a nullity. The plea is that Aeroflot (Soviet Airlines) is a General Department of International Air Services of the U.S.S.R.; that it is a Governmental organisation of the Union of Soviet Socialist Republics and all its belongings are the property of the U.S.S.R.; that it is a foreign State within the meaning of the expression as used in Section 86 of the Code of Civil Procedure, 1908 (for short called the Code); that it could not be sued except with the consent of the Central Government certified in writing by a Secretary to that Government as provided in sub-section (1) of Section 86 and that the requisite consent has not been obtained. Similarly no' decree can be executed against the property of a foreign State except with the consent of the Central Government by a Secretary to that Government, as provided in sub-section (3) of Section 86.

(3) The defense of the decree-holder is two-fold. Firstly, he says that the petition under Section 86 of the Code is not maintainable since the suit filed by the plaintiff is under a special procedure prescribed under the Carriage by Air Act, 1972. The decision as to how to regulate the rights and liabilities of the carriers in international flights was made on October 12, 1929 in a Convention for the unification of certain rules relating to international carriage by air which Convention was signed at Warsa on October 12, 1929 which was amended by the Hague Protocol on September 28, 1955 and our Parliament had enacted Act 69 of 1972 i.e. the Carriage by Air Act, 1972 (for short called the Act) to give effect to the aforesaid Convention for the international carriage. The provisions of the aforesaid convention have been embodied in the Schedules to the Act and have the force of law in India in relation to any carriage by air to which these rules apply irrespective of the nationality of the aircraft performing the carriage. Since U.S.S.R. is a party to the convention of Warsa, accordingly, the provisions of the Act are applicable to the facts of the present case as the suit is under a special enactment and not under an ordinary law. The Act is a special Act to deal with the rights' and liabilities of the carriers as well as the forum of any action by damages. The contention is that the provisions of Section 7(1) of the Act will prevail over Section 86(1) of the Code. Consequently, the decree obtained by the plaintiff/decree-holder is argued as valid in law and no permission under Section 86 of the Code is required to be obtained for execution. Secondly, it is denied that Aeroflot (Soviet Airlines) is a General Department of International Air Services of the Union of the Soviet Socialist Republics. It is denied that the same is a Governmental Organisation of the Union of Soviet Socialist Republics. Even if it is found that the Airlines Aeroflot is wholly owned by the Government of U.S.S.R., the submission is that as a carrier as distinct from the Government off U.S.S.R., it is placed on the same footing as Air India/Air France/other carriers which are operating in India. At the bearing, this second defense is developed that the doctrine of sovereign immunity is not applicable to the ordinary commercial transactions, as distinct from the Governmental acts' of a sovereign State. The suit of the plaintiff/ decree-holder arose out of the breach of contract for the carriage of the decree-holder and his goods from Delhi to Frankfurt by Aeroflot (Soviet Airlines) by flight No. SE-558. The decree-holder claimed in the suit Rs. 25,066.60 as cost of the articles contained in the attache case vide Baggage Ticket No. S.V. No. 47163 not delivered back to the decree- holder and Rs. 7,000 as refund of the airfreight charges from Delhi to Frankfurt one way as the Journey was not allowed to be performed. In addition, the decree-holder claimed Rs. 4 lacs as damages in the form of 10 per cent loss of profit on firm contracts, 12 per cent incentives which was to be given to the decree-holder by Government of India on exports and 30 per cent loss of profits of replenishment licenses, caused on account of the inability of the decree-holder to reach for the purposes of entering into binding contracts with the intending purchasers at the destination in time because of the facts, neglects and defaults of AEROFLOT.

(4) Let me first clear the ground. Firstly, evidence has been led by affidavits and a certificate under the seal of the Embassy of the Union of Soviet Socialist Republics in India has also been filed to the effect that Aeroflot 'Soviet Airlines' is the governmental organisation and all its belongings including aircraft are the property of the Union of Soviet Socialist Republics. There is no rebuttal by the decree-holder. My attention is also invited to Article 6 of the Constitution (Fundamental Law) of the Union of Soviet Socialist Republics as amended. It provides, inter alia, that air transport are State property, that is, belong to the whole people. Aeroflot thus, is an alter ego or organ of the Government. Secondly, the provisions of Section 6 of the Code are imperative and a decree passed by a Court without requisite certificate of consent would be a nullity. (See 'Gaekwar Baroda State Railway V. Hafiz Habib -ul-Haq and others' ). Thirdly, it is settled position of law that the question whether a decree is a nullity and not in existence by reason of the fact that it was passed by a Court without jurisdiction can be entertained even by the executing Court. Where there is inherent lack of jurisdiction in a Court, a decree passed by i't is a nullity. The executing Court can see whether a decree to be executed is an operative decree capable of execution. A decree passed by a Court without the requisite certificate would be by a Court which has no jurisdiction at all to entertain it. In the absence of the consent of the Central Government as prescribed by sub-section (1) of Section 6 of the Code. the suit could not have been entertained at .all. It would be a case of total absence of competence and hence the decree by the Court would be nullity.

(5) The doctrine of sovereign immunity is that a sovereign State should not be sued or could not be imp leaded in the Courts of another sovereign State against its will. The doctrine grants immunity to a foreign Government or its Department of State or anybody which can be regarded as an alter ego or organ of the Government. Every sovereign State respects the independence of every other sovereign State and as a consequence declines to exercise by means of any of its' Courts jurisdiction over the person of any sovereign or over the public property of any State. Mr. P. R. Mirdul, the learned counsel for the decree-holder invites my attention to the extent of sovereign immunity granted by various nations. He contends that the extent of sovereign immunity differ in its application from nation to nation and even there has been transformation in i't from time to time. Some countries granted absolute immunity while other granted Limited immunity. England with most other countries adopted the rule of absolute immunity over a century back. It was adopted because it was considered to be the rule of International Law at that time. In the Parliament Beige (1874) All E.R. 104, Brett, C.J. said that ''The excerption of the person of every sovereign from adverse suit is admitted to be a part of the law of nations so also his property. The universal agreement which has made these propositions part of the law of nations has been an implied agreement'. Lord Atkin in 'Campania Naviera Vascongada V. Steamship Cristina and all persons claiming an interest therein' 1938 (1) All. E.R. 719 in the classic re-statement of the doctrine said

'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'.

(6) The counsel urges that there has since been a transformation of functions of a State. They are no longer restricted to the traditional functions of a sovereign. The State has entered into commercial activities. This transformation in the function of a, sovereign State has modified the rule of the international law relating to absolute immunity. Most of the countries have replaced it by a doctrine of restrictive immunity. This doctrine gives immunity to acts of a Governmental nature, described in Latin as jure imperil, but no immunity to acts of a commercial nature, jure gestionis. Reference is made by the counsel to the development in this modern rule of law in the English Courts. In 'Rahimtoola V. The Nizam of Hyderabad and others' 1957 (3) All. E.R. 441, Lord Denning said that if the dispute concerns, for instance, the commercial transactions of a foreign Government, whether carried on by its own departments or agencies or by setting up separate legal entities, and it arises properly within the territorial jurisdiction of English Courts, there is no ground for granting immunity. Again in 'Thai-Europe Tanioca Service Ltd. V. Government of Pakistan' 1975 (3) All. Er 961, It was stated that a foreign sovereign has not immunity when it enters into a commercial transaction with a trader in England. In 'Tranter Trading Corporation Ltd. V. Central Bank of Nigeria' 1977 (1) All. E.R. 881 there is a detailed discussion of the transformation of the rule of international law which form part of English law. The doctrine of restrictive immunity was adopted by the Court of Appeal. The House of Lords accepted it in 'Congreso del Fartido' 1981 (2) All E.R. 1064. It was held that actions, whether commenced in personam or in rem, were to be decided according to the restrictive theory of sovereign immunity so that a sovereign State had no absolute immunity as regards commercial or trading transactions'.

(7) The submission of the counsel is that most of the European countries as well as the United States of America have abandoned the doctrine of absolute immunity and adopted the resfricS've immunity. The problems arising out of claims to sovereign immunity arose in U.S.A. in different ways than those dealt with by English Courts. They were called upon to deal with claims to immunity on behalf of State owned (?r operated vessels at P earlier times. The American Courts' have reached different conclusions on the interest required of a foreign sovereign before his plea of immunity could be allowed by those Courts. There has now been an increasing tendency to distinguish between the public and the commercial activities of foreign States. The Italian Courts have consistently applied their normal jurisdiction rules with respect to foreigners or foreign sovereign States unless the defendant concerned could show that he or i't was acting in a sovereign capacity. The Belgian Courts have also adopted a most restrictive view of the sovereign act with the result, that they have deflated an approach much in line with that of Italian Courts'. The' French Courts in its recent decisions have been in line with the general accepted distinctions between acts jure imperil and acts jure gestionis. The Federal Republic Courts have held recently that unrestricted immunity can no longer be regarded as a rule of customary international law. The thrust of the argument of the counsel for the decree-holder is that the Courts in India should also grant immunity with respect to causes of action arising cut of a foreign State's, public or Governmental action and no immunity with respect to those arising out of its commercial activities such as running an international airlines.

(8) I will trace the development of doctrine in India. The question of sovereign, immunity came to be considered in India in the early last century primarily whether the Rulers, Chiefs and Princes had a status rendering them exempt from the jurisdiction of the Courts. Certain Rulers were held to be sovereign or semi- sovereign and immunity was granted even though they were acting, in their capacity of traders carrying on business in British territory. There is a circular order dated March 4, 1836 of the old Sadar Diwani Adalat of Bengal which declared that 'civil claims against independent chiefs, whether by their subjects or by others, cannot be taken cognizance of by the Courts'. This was not altered by the first Civil Procedure Code of the year 1859. When the Code was enacted in 1877, the Courts in England had already recognised the absolute privilege enjoyed by independent sovereigns and their ambassadors in the Courts in England, in accordance with the principles erf international law. Section 433 of the Code of 1877 did not grant an absolute immunity. It was made dependent upon he consent of the Government certified by the signatures of one of its Secretaries which could be given only under specified conditions. The consent was not to be given unless (a) the Prince, Chief, ambassador or envoy has instituted a suit in such Court or (b) the Prince, Chief, ambassador or envoy himself or another trades within the local limits of the jurisdiction of such Courts' or (c) the subject matter of the suit is immovable property situated within the local limits and in possession of the Prince, Chief, ambassador or envoy. Commercial activity carried on was considered even at that time as one of the considerations for granting the consent. 'This modified or conditional privilege is based upon essentially the same principle as the absolute privilege, the dignity and independence of the Ruler which would be endangered by allowing any person to sue him at pleasure and the political inconveniences and complications which would be the result. Section 433 constituted a modification of the international rule turn Indian purposes' 'as expressed by Strachey, J. in 'Chandulal Khoshaiji v. Awad Bin Umar Sultan Nawaz Jung Bahadur' 1896 (21) Bom 351. The Code of 1882 enacted the same provisions as of the Code of 1877. Under the unamended Code of 1908 any such Prince or Chief, and any ambassador or envoy of a foreign State could be sued with the requisite consent, but not without such consent, in a competent Court in India. Again the same three conditions were specified in Section 86(2) of the Code. The giving of the consent was circumscribed and made dependent on the satisfaction about the existence of one of the conditions. There was a legislative extention of the jurisdiction over a sovereign though under the Intel national Law even at that time, there was absolute immunity. The sovereigns, whether their powers in their States be absolute or limited, could not be sued in England On their obligations whether ex contracts, quasi ex contracts or ex delicto. In the objects and reasons contained in Clause 30 while enacting Act 104 of 1976 the principle enunciated by Strachey, J. is restated. The concept of the Ruler of a foreign State was over-emphasised in the. Code and that was the reason to amend it to 'Foreign State'. No absolute immunity provided. The suit could' still be instituted with the consent of the Central Government obtained in the prescribed manner and given on satisfaction of one of the conditions including the commercial activity of the sovereign. Whatever the principle of international law may have been the Courts in India were concerned with the statutory form given in Section 433 of the Code of 1877, in Section 86 of the Code prior to the Code of Civil Procedure (Amendment) Act, 1951, and now in Sections 86 and 87 of the Code of 1908, as it stands amended by amendment Act 104 of 1976. The Legislature did not think it proper to adopt the rule of international law with the developments from time to time or in entirety as existing on the date of the enactments. As the preamble to Act V of 1908 says, it is an Act to consolidate amend the laws relating to procedure of the Courts of Civil Judicature. Section 86 after the amendment by Act 104 of 1976 reads as follows

'86.(1) No foreign State may be sued in any Court otherwise competent to try the suit except with the consent of the Central Government certified in writing by a Secretary to that Government : Provided that a person may, as a tenant of immovable property, sue without such consent as aforesaid a foreign State from whom he holds or claims to hold the property. (2) Such consent may be given with respect to a specified suit or to several specified suits or with respect to all suits of any specified class or classes, and may specify, in the case of any suit or class of suits, the Court in which the foreign State may be sued, but it shall not be given, unless it appears to the Central Government that the foreign State; (a) has instituted a suit in the Court against the person desiring to sue it, or (b) by itself or another, trades within the local limits of the jurisdiction of the Court, or (c) is in possession of immovable property situate within those limits and is to be sued with reference to such property or for money charged thereon, or (d) has expressly or impliedly waived the privilege accorded to it by this section. (3) Except with the consent of the Central Government, certified in writing by a Secretary to that Government, no decree shall be executed against the property of any foreign State. (4) The proceeding provisions of this section shall apply in relation to (a) any Ruler of a foreign State; (aa) any Ambassador or Envoy of a foreign State; (b) any High Commissioner of a Commonwealth country; and (c) any such member of the staff of the foreign State or the staff or retinue of the Ambassador or Envoy of a foreign State or of the High Commissioner of a Commonwealth country as the Central Government may, by general or special order, specify in this behalf, as they apply in relation to a foreign State. (5) The following persons shall not be arrested under this Code, namely : (a) any Ruler of a foreign State; (b) any Ambassador or Envoy of a foreign Stale; (c) any High Commissioner of a Commonwealth country; (d) any such member of the staff of the foreign State or the staff or retinue of the Ruler. Ambassador or Envoy of a foreign State or of the High Commissioner of a Commonwealth country, as the Central Government may, by general or special order, specify in this behalf. (6) Where a request is made to the Central Government for the grant of any consent referred to in sub-section (1), the Central Government shall, before refusing to accede to the request in whole or in part, give to the person making the request a reasonable opportunity of being heard.'

The question of sovereign immunity or privileges in India depends upon !hc construction of the statutory provisions. Amendments have been made from time to lime in the Code. The Judicial Committee in Baroda's case (supra) had held that the provisions of Section 86 could not be waived. Clause (d) of sub-section (2) of Section 86 was substituted in 1951 which makes it clear that the privilege accorded could be waived either expressly or imoliedly. Section 433 of 1877 Code or Section 86 of 1908 Code did not prevent absolutely the suits against foreign Government or a trading Corporation which is an organ of a foreign Government Those suits were made conditional on the consent to be given on the satisfaction of the specified conditions. The trading or commercial activity of the sovereign is one of the conditions on the satisfaction of which the consent to sue can be given. When these provisions were made in the Code of 1877 and later enacted in the Code of 1908, the doctrine of immunity under International Law did not draw any distinction between acts jura imperia and act jura gestionis. Those provisions did not completely cover the field of doctrine of immunity under International Law, but adopted a modified doctrine, of immunity in the Code which is codifying Cnactment. The provisions of the Code are clear and explicit and thus only those provisions can be looked into for considering the extent. There was, now an opportunity to make amendments in the Code in 1976 when exhaustive amendments were being made and the transformation in the International Law about the doctrine of sovereign immunity had taken shape. The legislature did not make any amendments in that regard in the Code. The Code specifically deals with the immunity and the extent of it. It must be taken to be exhaustive, of the matter dealt with.

(9) The question whether a foreign State enjoys immunity in respect of a sovereign act but not in respect of a commercial act was raised before the Calcutta High. Court in 'U.A.R. v. Mirza Ali', : AIR1962Cal387 . Mr. Sobyasachi Mukerjee (as his Lordship then was) pointed out the 'then current developments of the principles of International Law, the views of Lord Denning and the views of eminent international jurists. The doctrine of restricted immunity based on the distinction between jura imperia and jura bastions was not accepted by the Division Bench as the positive international law of our country. The case was taken to the Supreme Court and is reported as 'Ali Akbar v. U.A.R.', : [1966]1SCR319 . It was contended there that the Code being a codifying enactment and inasmuch as principle of international law has been recognised under Sections 86(1) and 87-A to the extent mentioned in 'those sections, only the relevant provisions of the Code can be looked at and the principles of international law can have no application whatsoever in India. It was also urged that the effect of Section 86(1). is to modify to a certain extent the doctrine of immunity recognised by international law and that it is a modified form of the absolute privilege enjoyed by independent sovereign and their ambassadors in the Courts in England in accordance with the principles of international law. It was held :

'THE effect of the provisions of Section 86(1) appears to be that it makes a statutory provision covering a field which would otherwise be covered by the doctrine of immunity under International law. is not disputed that every sovereign State is competent to make its own laws in relation to the rights and liabilities of foreign States to be sued within its own municipal Courts. Just as an independent sovereign State may statutorily provided for its own rights and liabilities to sue and be sued, so can it provide for the rights and liabilities of foreign States to sue and be sued in its Municipal Courts. That being so, it would be legitimate to hold that the effect of S. 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 S. 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, S. 86(1) is not merely procedural; it is in a sense a counter-part of S. 84. Whereas S. 84 confers a right on a foreign State to sue, S. 86(1) in substance impedes a liability on foreign States to be sued, though this liability is circumvented and safeguarded by the limitations prescribed by it. That is the effect of S. 86(1).

(10) The question whether Section 86 is a statutory recognition of the International Law came to be considered by the Bombay High Court in 'Indrajit Singhji v. Rajendra Singhji', : AIR1956Bom45 in a proceeding for the grant of letter of administration and whether it is a 'suit' within Section 86 of the Code. It was observed :

'......THEPrivy Council has held that the consent required under S. 86 cannot be waived and thereforee it would not be treading on safe ground to inquire what is the principle of International Law and to construe S. 86 in the light of that principle. If the language of S. 86 permitted such a construction, perhaps it would not be objectionable to consider rules of International Law because our country also is in the comity of Nations, and there is no reason why we should not as much as other countries give effect to well settled principles of International Law. But if the language of the section is clear and is capable of only one construction in the context in which that language is used. then in our opinion it would be an unjustifiable attempt cm the part of the Court to engraft upon the statutory provision a principle of International law which the Legislature itself did not think it proper to do.'

(11) State Immunity Act, 1978 has been enacted. As the preamble says it is an Act to make new provision with respect to proceedings in the United Kingdom by or against other State; to provide for the effect of judgments given against the United Kingdom in the Courts of the States parties to the European Convention State Immunity; to make new provision with respect to the immunities' and privileges of the heads of State and for connected matters. Once an Act of Parliament has been made it is clear that the immunity from the jurisdiction of the Courts which foreign sovereign States can claim now in United Kingdom is regulated by the State Immunity Act, 1978.

(12) The preamble says that the Code consolidates and amends the laws relating to procedure of the Courts of Civil Judicature in India. There was a legislative extention of the jurisdiction over a sovereign though under the International Law even at the time of enactment of Section 433 of Code of 1877 or Section 86 of the Code of 1908, there was absolute immunity. The suit could be instituted with the consent of the Government obtained in the prescribed manner and given on satisfaction of one of the conditions including the commercial activity of the sovereign. I am unable to pursuade myself to agree that the transformed principles of International Law should be read into the statutory provisions and would be applicable in India. In the interpretation of Statutes, the Court always presumes that the legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect. Every word in the statute is required to be given a meaning. Adoption of the construction as suggested by the counsel for the decree-holder would leave without effect clause (b) of sub-section (2) of Section 86. A statute ought to be construed in a manner that, if it can be prevented, no clause, sentence or word shall be superfluous of insignificant. This can only be if the relevant provisions of the Code are only looked into for consideration of the claims of sovereign immunity. The transformed principles of International Law after the enactment of the Code, have no application in India, unless the legislature amends the statutory provisions.

(13) The objection that the special form off procedure prescribed by the Carriage by Air Act, 1972 would prevail over the one prescribed by Section 86 of the Code is not seriously pressed by the counsel for the decree-holder. There is no provision in the matter of sovereign immunity contained in the Act. The Code deals with procedural matters that is the matters relating to the machinery for the enforcement of substantive rights. These substantive rights may be contractual of flowing from the statutory provisions, including the Act. The Act allows suits to be filed in a civil Court relating 'to the matters under it, but the procedure to be followed in such suit will be governed by the provisions' of the Code. The Act does not confer jurisdiction on the Civil Court or provide a special procedure in dealing with claims arising out of or under the statutory provisions. The suit had to be determined according to the law of procedure laid down in the Code. No foreign State could be sued in any Court otherwise competent to try the suit except with the, consent of the Central Government certified in writing by a Secretary to that Government.

(14) In the result, I hold the the institution of suits in India against foreign State are regulated by the statutory provisions contained in Section 86 of the Code and the transformed principles of International Law cannot be incorporated in it. The suit instituted against Aeroflot was without the requisite certificate and hence the decree passed by this Court is a nullity and thus inexecutable, I make no order as to costs,


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