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New Central Jute Mills Co. Ltd. Vs. Veb Deutfracht Seereederei Rostock and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtKolkata High Court
Decided On
Case NumberAppeal No. 94 of 1982
Judge
Reported inAIR1983Cal225
ActsCode of Civil Procedure (CPC) , 1908 - Sections 86, 87 and 87A; ;Constitution of India - Article 51
AppellantNew Central Jute Mills Co. Ltd.
RespondentVeb Deutfracht Seereederei Rostock and ors.
Appellant AdvocateSudipta Sarkar, Adv.
Respondent AdvocateT.K. Basu, Adv. (for No. 2) and ;Sankar Mitra, Adv. (for No.2)
Cases ReferredCekop v. Asian Refractories Ltd.
Excerpt:
- sabyasachi mukharji, j. 1. this is an appeal from the judgment delivered and order passed by the learned trial judge on 3rd of feb., 1982. it appears that the plaintiff is the consignee of certain goods covered by the bill of lading. it would be necessary to appreciate the questions in this case, to refer to certain facts.2. on or about 20th of june, 1979 the plaintiff who is the appellant here duly purchased divers spare parts and accessories for the m. g, compressor at its ammonia plant from one neuman & esser, federal republic of germany. it is not necessary to set out the details of the goods. it is further the case of the appellant that it duly paid the said purchase price of the said goods and became the owner thereof and the property therein according to the appellant duly passed.....
Judgment:

Sabyasachi Mukharji, J.

1. This is an appeal from the judgment delivered and order passed by the learned trial Judge on 3rd of Feb., 1982. It appears that the plaintiff is the consignee of certain goods covered by the Bill of Lading. It would be necessary to appreciate the questions in this case, to refer to certain facts.

2. On or about 20th of June, 1979 the plaintiff who is the appellant here duly purchased divers spare parts and accessories for the M. G, Compressor at its ammonia plant from one Neuman & Esser, Federal Republic of Germany. It is not necessary to set out the details of the goods. It is further the case of the appellant that it duly paid the said purchase price of the said goods and became the owner thereof and the property therein according to the appellant duly passed to the appellant. It is also not necessary to set out the details of the price of the goods.

3. In the suit the plaintiff has come up in appeal 'making the first defendant viz. VEB Deutfracht Seereederei Rostock (DSR LINES), a company indicated as incorporated under the appropriate laws -of West Germany and carrying on business at a certain address in West Germany and also in India at an address in Calcutta. The second defendant viz. The Oceanic Shipping Co. Pvt. Ltd. is the shipping company and the third defendant which is the National Insurants Company Ltd. has also been made a party. There is a mistake as the defendant No. 1 Company has been described as a company incorporated under the appropriate laws of West Germany. It appears that it is not a company of West Germany and there for the word 'West Germany' is obviously wrong. It has been urged that the appellant as we as the respondent No. 1 contend that both parties were under the impression that the respondent No. 1 was a company incorporated in West Germany and not in East Germany which appears to be the position.

4. The case of the appellant is that the appellant is merely a consignee of certain goods and the respondent No. 1 which is also called DSR LINES was the carrier carrying the goods from Hamburg Port in West Germany to Calcutta and the goods got damaged and became defective and certain repairs were necessary. Therefore thesuit has been filed against the carrier under the Bill of Lading in this Court. Upon institution of the suit an application was made by the respondent No. 1 (DSR LINES) and in the cause title portion it was stated in the petition that the company was incorporated under appropriate laws of West Germany; as we have noted hereinbefore there must have been a mistake.

5. In the petition the respondents to this appeal being the defendant No. 1 stated that the respondent No. 1 was the department and/or agent and/or instrumentality of the Government of German Democratic Republic. It was further asserted that the German Democratic Republic has been and still is recognised by Government of India as a Sovereign Foreign State and there exists diplomatic relation between the Government of India and the Government of the German Democratic Republic. The respondents further state that under the laws of German Democratic Republic amongst others all water and air transport are State property, i.e. belong to the people of the German Democratic Republic.

6. 'ERNST SCHNELIER' is the name of the vessel and such vessel belongs to-and/ or is owned by German Democratic Republic. A xerox copy of the extract from the Register of Shipping of German Democratic Republic was annexed to the petition. It was apparent from the said extracts that the vessel was the property of the German Democratic Republic. It was asserted in the petition that under the laws of the German Democratic Republic all sea-going vessels flying German Flag were entered in the Register of Shipping and the said Register was the official document in respect of existing rights in the said vessel. The respondent has been shown as the bearer of all rights vis-a-vis the said vessel in the said Register of Shipping as also an entity owned by the German Democratic Republic and constitutes a department and/or agency and/or instrumentality of the German Democratic Republic.

7. In that view of the matter it was submitted that the said body could not be sued in the Courts of India and the instant action was not maintainable inasmuch as no consent of the Central Government or Union of India had been obtained prior to the institution of the suit as required by the relevant provisions of the Code of Civil Procedure.

8. It was further stated that apart from the well established principles of Inter-national Law the doctrine of immunity of the person and property of foreign Sovereign or State from the jurisdiction of the Courts of other States was accepted by the States. The Union of India as concession to the dignity, equality and independence of foreign States without hindrance had made provisions in its laws. This doctrine of immunity even extended to a claim for damages arising out of alleged negligence.

9. It is further asserted that the doctrine of immunity even extended to incorporated body foaving a juristic personality in the event of its being a department of the foreign State and inasmuch as the respondent was a department of the Govt of German Democratic Republic was entitled to the immunity extended by the comity of nations to a sovereign State and/or it a property and person. The respondent No. 1 therefore prayed that the said respondent could not be sued in Indian Courts and as such it was prayed that the plaintiff's Suit No. 1021 of 1980 should be dismissed and taken off the file.

10. This application came up for hearing before the learned trial Judge and was disposed of by the judgment we have referred to hereinbefore. Before we refer to the judgment we will mention that in the petition there were certain extracts from the entries in the Register of Shipping of West Germany which were annexed therein and where it was stated as follows:

'This is to certify that on order of the German Democratic Republic -

all seagoing vessels flying the flag of the German Democratic Republic must be entered into the G. D. R.'s Register of Shipping,

-- the Register of Shipping is exclusively kept by the Board of Shipping of the German Democratic Republic,

-- the Register of Shipping as kept by the G. D. R. Shipping Board for all G. D. R. seagoing vessels is the only official document in respect of all existing rights vis-a-vis the vessel, such as ownership, lien, etc. The authenticated extract from the G. D. R. Shipping Register for the M/s. 'ERNST SCHNELIER' shows that the vessel is owned by the people of the German Democratic Republic and hence, owned by the State.

If in the document the VEB Deutfracht Seereederei Rostock, abbreviated as 'D.S.R.', is referred to as 'bearer of rights' the term stands for the German 'Reehtstraeger' and is meant to say that D. S. R. have, been entrusted with, and have taken over, the use of that seagoing vessel. 'Bearer of rights' in relation to D. S. R. is to say that State property has been placed at the disposal of a nationally owned enterprise. Said enterprise, by that procedure, however, does not obtain the right unconditionally to dispose of the property entrusted to it. The enterprise will have the right to administer the property, but does not become the owner of the property. Ownership remains with the State.'

11. Objection had been taken in respect of the certificate referred to hereinbefore. Thereafter further time was taken on behalf of the respondent No. 1. Certificate of the German Consul General was filed and that certificate was given by one Dr. Erhard Schaller, Consul General of the German Democratic Republic in Bombay-India and It is as follows:

'-- All seagoing vessels flying the flag of the German Democratic Republic must be entered into the G. D. R.'s Register of Shipping.

-- the Register of Shipping is exclusively kept by the Board of Shipping of the German Democratic Republic.

-- the Register of Shipping as kept by the G. D. R. Shipping Board for all G. D. R. seagoing vessels is the only official document in respect of all existing rights vis-a-vis the Vessel, such as ownership, lien, etc.

12. The authenticated extract from the G. D. R. Shipping Register for M/s. 'ERNST SCHNELIER' shows that the vessel is owned by the people of the German Democratic Republic and hence, owned by the State.

'If in the document the VEB Deutfracht Seereederei Rostock, abbreviated as 'D.S.R.', to referred to as 'bearer of rights' the term stands for the German 'Rechtstraeger' and it meant to say the D. S. R. have been entrusted with, and have taken over, the use of that seagoing vessel. 'Bearer of rights' In relation to D. S. R. is to say that State property has been placed at the disposal of a nationally-owned enterprise. Said enterprise, by that procedure, however, does pot obtain the right unconditionally to dispose of the property entrusted to it. The enterprise will have the right to administer the property, but does not become the owner of the property. Ownership remains with the State.

I do hereby further certify VEB Deutfracht Seereederei Rostock, abbreviated as'D. S. R.' commonly known as D. S. R. Lines constitutes a department of the Government of the German Democratic Republic exercising the rights of a legal entity.'

13. We may incidentally mention that the petition from where averments have been set out before was verified by one Yezdi Naval Dastur who described himself as a constituted attorney of the petitioner. He has not stated anything about his particular knowledge of the German Law of the Constitution as such. The learned trial Judge after setting out the facts and the contentions referred to the several decisions to which learned Judge's attention was drawn, came to the conclusion that from the decisions cited at the Bar, it appeared that the law on the point was more or less settled so far as Indian Courts were concerned. The learned Judge held that before a Court in India it could be contended by a party that it was either a foreign Sovereign or Ruler or a body corporate or an unit which was a part of a foreign Government or Sovereign and as such was entitled to protection under Section 86 of the Code of Civil Procedure. The learned Judge emphasised that Courts of India were not called upon to go into the question as to what extent the doctrine of immunity a creature of international law, would be applicable in favour of a party to a lis pending before the Courts. According to the learned Judge the finding was to find out whether the party, claiming immunity was a foreign sovereign or was a part or unit of a foreign sovereign.

14. In the event such contention was established, according to the learned trial Judge, the Court had to examine next whether the consent of the Central Government had been obtained before the suit was instituted. To the extent as stated above the application, according to the learned trial Judge, of the doctrine of immunity was restricted in the Courts of India by Section 86 of the Code of Civil Procedure. The learned trial Judge, noted that in the instant case a certificate from the Consul of the German Democratic Republic, certifying that the respondent No. 1 was a department or agency OB instrumentality of the said German Republic had been produced. The relevant part of the Constitution of the German Democratic Republic and the entries in the Register of Shipping of the said Republic had also been produced by way of further evidence. It was contended on behalf of the plaintiff appearing before the learned trial Judge that this issue should be examined at the trialof the suit. The learned trial Judge was unable to accept this contention. On the evidence before him the learned Judge found it to be established that the defendant No. 1 or the respondent No. 1 was a part of the foreign Government or State and could not be proceeded against in the suit without the prior consent of the Central Government under Section 86 of the Code of Civil Procedure which admittedly in this case was not there. In that view of the matter be acceded to the prayer of the respondent-defendant No. 1 and directed that the plaint be rejected and the suit be dismissed as against the defendant-respondent No. 1. This is an appeal from the said decision of the learned trial Judge.

15. Before we proceed further we may mention that our attention was drawn to a book on the Constitution of the German Democratic Republic which was certified to be the correct Constitution by the Consul General of the German Democratic Republic. Some reference has been made to the various Articles of the Constitution. We may mention Article 8 which reads as follows :--

'(1) The generally accepted rules of international law serving peace and peaceful international co-operation are binding upon the State and every citizen. The German Democratic Republic will never undertake a war of conquest or employ its armed forces against the freedom of another people.

(2) The establishment and cultivation of normal relations and co-operation between the two German States on the basis of equality are national concerns of the German Democratic Republic. The German Democratic Republic and its citizens strive in addition to overcome the division of Germany imposed upon the German nation by imperialism, and support the step-by-step rapprochement of the two German States until the time of their unification on the basis of democracy and socialism.'

16. Article 12 on the material portion of Which reliance was placed in this case reads as follows:--

'(1) Mineral resources, mines, power stations, barrages and large bodies of water, the natural resources of the continental shelf, the larger industrial enterprises, banks and insurance companies nationally-owned farms, traffic routes, the means of transport of the fairways, ocean shipping and civil aviation, post and telecommunication installations, are nationally-owned property, Private ownership thereof is inadmissible.

(2) The socialist State ensures the use of nationally owned property for the greatest good of society. This is served by socialist planned economy and socialist economic law. The utilization and management of nationally-owned property is in principle carried out by the nationally-owned enterprises and State institutions. The State can assign by contract the utilization and management of such property to co-operative or social organizations and associations. Such an assignment shall serve the public interest and the increase in social wealth.'

17. Article 33 to which our attention was drawn stated that every citizen of the German Democratic Republic had the right to legal protection by the organs of the German Democratic Republic when abroad. Some argument was sought to be advanced on behalf of the appellant that the organs of the German Democratic Republic were different and distinct and separate from the German Democratic Republic as such. We are unable to accept this contention that this Article leads to such a conclusion or helps to arrive at such a conclusion. Article 41 stated that the socialist enterprises, towns and local communities were to work in a certain manner. It was also emphasized on the basis of this Article that the socialist enterprises were different and distinct from the State. Our attention was drawn to Article 91 to emphasize that certain aspect of international law was also followed relating to the punishment of crimes. This aspect was not quite relevant for the controversy before us. The main question in our opinion is to determine the scope and effect of Section 86 of the Code of Civil Procedure. The relevant portion of Section 86 which was amended in 1976 reads as follows:--

'86. (1) No foreign State may be sued in any Court otherwise competent to try fine 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 from whom he holds er 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.

Sub-section (4) of the said section has been altered by deleting any Ruler of a foreign State and including any Ambassador or Envoy of a foreign State. There are some alterations in Sub-section (5) which are not material for our present purpose. Section 87 reads as follows:--

'87. The Ruler of a foreign State may sue, and shall be sued, in the name of his State : Provided that in giving the consent referred to in Section 86, the Central Government may direct that the Ruler may be sued in the name of an agent or in any other name.' Section 87A reads as follows :--

'Definitions of 'foreign State' and 'Ruler'.

(1) In this part,--

(a) 'foreign State' means any State outside India which has been recognised by the Central Government; and

(b) 'Ruler', in relation to a foreign State, means the person who is for the time being recognised by the Central Government to be the head of that State.

(2) Every Court shall take judicial notice of the fact -

(a) that a State has or has not been recognised by the Central Government;

(b) that a person has or has not been recognised by the Central Government to be the head of a State.'

It is not necessary to deal with the other sections. A plain reading of Sub-section (1) of Section 86 would indicate that the section comprehends all suits against foreign State and states that such a suit against a foreign State cannot be instituted except with the consent of the Central Government. The question in this case, is, that when the suit is expressly or ex facie not against a foreign State by name as such, will Section 86 still apply if it is contended that in reality the suit is against an organ or institution which forms a part of that State. It is apparent that Section 86 puts a certain embargo in respect of suits against foreign States and in this connection on a matter of interpretation it is perhaps helpful to remember the warning of Lord Justice Stephenson in the case of Trendtex Trading Corporation Ltd. v. Central Bank of Nigeria, (1977) 1 All ER 881 at page 898, where Lord Justice observed that the Courts should be extremely careful not to extend sovereign immunity to bodies which are not clearly entitled to it and, therefore, it is necessary that in order to extend the restriction to bodies other than State by name there must be clear expression of intent of legislature to enable the Courts to come to that conclusion. After all this is a restriction on the rights of the citizens of a State to institute suits in respect of injuries suffered by them. Therefore, it the provision of the Statute is clearly expressed, then, of course, the Courts must give effect to the same. But in interpreting the Statute it must clearly safeguard to see that there is no extension of curtailment of the rights of the citizens. Bearing the above principle in mind one has to approach the language of Section 86. In this connection it may be mentioned that Section 86 or its predecessor in the previous Act has been the subject matter of judicial interpretation and we must bear in mind the principal ratios of the said decisions. As we have mentioned herein before, it is quite apparent' on a plain residing of the expressions used whereas consent is required to institute suits against foreign States as such it does not appear that such restriction applies also to organs of foreign State or against a body or an organ which is even part of the foreign State. In this case we shall presently deal with the question that has arisen whether D. S. R. Lines, being me respondent No. 1 is a part of the German Democratic Republic or a separate entity. It is apparent or it is not disputed from the averments that the respondent No. 1 is a separate entity in law. It appears that it has the power of appointing the Constituted Attorney. It has also the power to appoint an agent being the respondent No. 2. It has not been disputed that it is not an independent legal entity or a juristic person. Quite apart from this it is self-evident from the suit that the suit is not against a foreign State as such and the name of the German Democratic Republic does not appear. It is also significant to bear in mind that it is not the case of the respondents that a suit against D. S. R. Lines, being the respondent-defendant No. 1, does not lie at all. What is being claimed is that such a suit could not be instituted without the consent of the Central Government as enjoined by Section 86 of the Code of Civil Procedure. Therefore, it is urgedon behalf of the respondents that such consent of the Central Government could have been availed of and has in fact not been availed of. The respondent does not dispute that a suit against D. S, R. Lines could have been instituted, as it proceeded on the basis that it could have been, if certain formalities had been followed. As the same formalities had not been followed, the suit was liable to be rejected.

18. As we mentioned hereinbefore, Section 86 or its predecessor in the previous Act has been the subject matter of judicial interpretation. In this connection we may refer to the decision of the Judicial Committee in the case of Gaekwar Baroda State Railway v. Hafiz Habib-ul-Haq, (1938) 65 Ind App 182: (AIR 1938 PC 165). There the plaintiff, a timber merchant, entered into four contracts for the supply of sleepers for the Gaekwar Baroda State Railway, which was admittedly owned by the Maharaja of Baroda and managed by his servants. The contracts, which were made in Baroda, were signed by the 'Manager and Engineer-in-Chief, Baroda State Railway. Subsequently, the then Manager and Engineer-in-Chief of the Railway, alleging that the sleepers delivered were not in accordance with the contract specifications, cancelled all the contracts. The plaintiff thereupon instituted proceedings against the Gaekwar Baroda State Railway through the Manager and Engineer-in-Chief of the Railway, claiming the balance of the price of the sleepers which had been supplied and damages for failure to take delivery of the remainder. It was held that the Railway Administration was not intended to be, and was not, a legal entity or establishment as a Corporation which could be sued through the head of the Railway Department. The suit was in reality, though not in form, one against the Gaekwar of Baroda, a Sovereign Prince within the meaning of Ss. 86 and 87 of the Civil P. C. and inasmuch as no certificate sanctioning the bringing of the suit had been obtained, as provided by Section 86, Sub-section (1) of the Code, and could not be in fact obtained because none of the conditions contained in Section 86, Sub-section (2) (a), (b) and (c) were applicable to the suit, the suit was not maintainable in the Courts of British India. It was contended by Sir William Jawitt, learned counsel appearing for the Gaekwar Baroda State Railway before the Judicial Committee that the action was obviously deliberately brought against the railway through the Manager and Engineer-in-chief to avoid the difficulty occasioned by the provisions of Section 86 of the Civil P. C., which provided that a Sovereign Prince should not be impleaded in the Courts of British India save with the consent of the Governor-General in Council. It was found that the sole proprietor of the railway was the Maharaja Gaekwar of Baroda, who was not a party to the suit, which was not maintainable against the railway through the Manager and Engineer-in-chief of the railway. It was urged on behalf of the appellant, being the Gaekwar Baroda State Railway that the suit as filed was not maintainable at all. The railway was not a corporation sole or otherwise, or indeed a legal entity at all, and, therefore, there could not be any suit upon the contracts in the manner it has been done. On the other hand, it was conceded by Sir William Jawitt before the Judicial Committee that if the railway was owned and managed by a corporation, then Section 86 of the Civil P. C. had nothing to do with the case. The Judicial Committee set out the relevant contention and noted that the appeal was in respect of the following plea:

'24. The suit net having been filed against 'the proper party is not maintainable; the defendant-Railway is owned by H. H. the Maharaja Gaekwar of Baroda, a Sovereign Prince, and is managed by His Highness Government, the claim against the Managar and Engineer-in-chief of the defendant-Railway, who is only a paid servant of the State, is bad in law.'

In order to appreciate the decision it is necessary to bear in mind that at the relevant time Sub-section (i) of Section 86 was as follows:

'86 (I). Any such Prince or Chief, and any Ambassador or Envoy of a foreign State, may with the consent of the Governor-General in Council, certified by the signature of a Secretary to the Government of India, but not without such consent, be sued in any competent Court'

19. The Judicial Committee noted that the Maharaja of Baroda was a Sovereign Prince within the meaning of those section and found that with regard to the legal position it was obvious that a suit could not be brought against an 'assumed person. There must be some juristic person. The Judicial Committee noted the written statement filed by the Manager and Engineer-in-chief of the railway and that it was stated that the suit was not filed against the proper party and was not maintainable. Tbe Judicial Committee, therefore, came to the conclusion that the suit was not maintainable as the Railway was not a separate corporation ora juristic entity and the entire Railway was owned by the Maharaja of Baroda.

20. Section 86 came up again for construction before the Supreme Court in the case of Mirza AH Akbar v. United Arab Republic, : [1966]1SCR319 . In that case in respect of a suit for damages for breach of contract instituted in the Original Side of the Calcutta High Court against the United Arab Republic it was held that it was governed by Section 86 of the Code of Civil Procedure and as such was not maintainable in the absence of consent of the Central Government, The Supreme Court was of the view that the effect of reading Sections 84, 86 and 87 together was that the suit would be in the name of the State, whether it was a suit filed by a foreign State under Section 84 or was a suit against the Ruler of a foreign State under Section 86, as it stood at the relevant time. The Supreme Court was further of the view that it would not be permissible, as a matter of procedure, to draw a sharp distinction of procedure between the ruler of a foreign State and a foreign State of which he was the Ruler. In every case, for the purpose of procedure, the suit had to be in the name of a State. The Supreme Court was further of the view that Section 86(1) applied to cases where suits were brought against the Rulers of foreign States and all foreign States fall within its scope whatever be their form of Government. The Supreme Court was further of the opinion that Section 86(1) had the effect of modifying to a certain extent the doctrine of immunity recognised by International Law. The section provided that foreign States could be sued within the municipal Courts of India with the consent of the Central Government and upon such consent being granted as required by Section 86(1) it would not be open to a foreign State to rely on the doc-trine of immunity under International Law because the municipal Court in India would be bound by the statutory provisions, such as those contained in the Code of Civil Procedure. In substance, Section 86(1) was not merely procedural, in a sense it was a counter-part of Section 84. Whereas Section 84 confers a right on a foreign State to sue, Section 86(1), in substance imposed a liability on foreign States to be sued though the liability was circumscribed and safeguarded by the limitation prescribed by it. The learned trial Judge in the High Court had held that S, 86, as it stood at the relevant time, did not bar the suit in question. He accepted the contention of the plaintiff in that case that the bar could be invoked only against the Ruler ofthe foreign State and not against respondent No. 1 which was an independent sovereign State. On the question of the plea raised by the respondents under International Law, the trial Judge held that having regard to the nature of the transaction which had given rise to the suit in question, the plea of immunity raised by the respondents could not be sustained. It may be mentioned that the suit was based on certain contracts for supply of tea. It may also be mentioned that Section 86 had since been amended and the present Sub-section (1) of Section 86 we have set out hereinbefore. The matter thereafter went up before the Division Bench of the Calcutta High Court under the Letters Patent Appeal. There, after referring to the arguments, both the learned Judges who constituted the Division Bench, upheld the findings of the trial Judge that Section 86 of the Code of Civil Procedure did not create any bar against the suit in question and thus they had reversed the trial Judges conclusion on the question of immunity claimed by the respondents under International Law as well as on the question of waiver. They further held that it was not shown that the application made by the respondents challenging the jurisdiction of the trial Judge to entertain the suit could be reasonably construed as submission to the jurisdiction of the Court by them and they came to the conclusion that the doctrine of International Law which recognised the absolute immunity of sovereign independent States from being sued in foreign Courts created a bar against the suit in question. In the result, they allowed the appeal. On a certificate granted, the matter went up before the Supreme Court and the Supreme Court after referring to the relevant provisions held in the manner we have indicated before. Therefore, it is apparent that the Supreme Court came to the conclusion that Section 86(1) applied to the suit in question and the Supreme Court held that in the absence of the consent of the Central Government, as prescribed by it, the suit could not be entertained. In that view of the matter, the Supreme Court found it not necessary to deal with other question! as to whether the respondents were justified in claiming immunity under the International Law. The Supreme Court observed that it was the common ground, if there was specific statutory provisions, such as those contained in Section 86(1) which allowed suit against a foreign State subject to certain conditions it was the said statutory pro-vision that would govern the decision of the question as to whether the suit had beenproperly filed or not. In dealing with such a question, it was necessary to travel beyond the provisions of the statute because the statute determined the competence of the suit. The Supreme Court had observed at page 236 of the judgment as follows:--

'30. The effect of the provisions of Section 86(1) appear to be that it makes a statutory provision covering a field which would otherwise be covered by the doctrine of immunity under International Law. It is not disputed that every sovereign State is competent to make its own laws in relation to the rights and liabilities of foreign State to be sued within its own municipal Courts. Just as an independent sovereign State may statutorily provide for its own rights and liabilities to sue and be sued, so it can 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 Section 86(1) is to modify to a certain extent the doctrine of immunity recognised by International Law. This section provides t hat 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 limitation prescribed by it. That is the effect of Section 86(1).'

21. This decision came up for consideration before the Division Bench of the Bombay High Court in the case of German Democratic Republic v. Dynamic Industrial Undertaking Ltd., : AIR1972Bom27 . There, one of the contentions urged before the Bombay High Court on behalf of the respondents, in appeal, was that the doctrine of immunity of the foreign sovereign State, which is available under the International Law, was not available in India in view of the provisions of Sections 86 and 87A of the Code of Civil Procedure. The Bombay High Court considered, in that context the position of International Law. On the evidence and facts before their Lordships, the first defendant was a body corporate controlled by and/or was a department of the second defendant, which was the German Democratic Republic. The third defendant was a Bank and was not directly concerned with the controversy. It was held that under Section 86 of the Code of Civil Procedure, the German Democratic Republic was a sovereign State and was entitled to claim immunity under the International Law. It was contended that the principle of International Law would have no application because of the provisions of the section as contained in Section 86 of the Code of Civil Procedure. The Bombay High Court after setting out the passage and observations of the Supreme Court held that the effect of Section 86 was to modify to a certain extent the doctrine of immunity recognised by International Law and had further observed that it was a modified form of the absolute privilege enjoyed by independent sovereigns and their ambassadors in the Courts in England in accordance with the principles of International Law. The Bombay High Court was of the view that the expression used was 'modified' and it signified that the doctrine of immunity applied in India but only with the modification as made by Section 86. The Bombay High Court was of the view that the Supreme Court did not mean or imply that Section 86 wholly supplanted the relevant doctrine under International Law. The expression 'modified' showed that the principles of International Law would be applicable in India but that in its application Section 86 created an exception. In International Law the immunity was absolute subject only to the exception and recognised in International Law, one of such exceptions being when the foreign Sovereign State waived the privilege of immunity. Section 86, according to Bombay High Court, created another exception, the exception being where the requisite consent was given by the Government of India, as provided under Section 86. But the provisions of Section 86 would to that extent operate as another exception and to that extent 'modify' the principles of International Law, and subject to this exception, according to Bombay High Court, the relevant principles of International Law would still be applicable in India. They referred to the decision of the Division Bench of the Calcutta High Court in the case of Royal Nepal Airlines Corporation v. Monorama Mehar Singh, : AIR1966Cal319 and they held that in view of the Supreme Court decision the principles of International Lawwere applicable but they stood modified by the provisions of Section 86 and that modification created an exception. In so far as the Bombay High Court held that Section 86 provided that the International Law was applicable we are in respectful agreement with that view of the Bombay High Court but in so far as the Bombay High Court held that the exception was only that in case of a foreign State which was entitled to immunity still sanction was required to be obtained under Section 86 and to that extent the principles of International Law stood modified, with great respect, we are unable to accept that construction of the Bombay High Court. But we must make clear that the Bombay High Court was not concerned with the contention nor did they have any occasion to deal with the contention where the suit was against defendant, which was not sued as State but as an incorporated body, Section 86 would have no application at all, though in the facts of that case the suit was instituted against one of the defendants which was a separate body than the State. From the decision of this case it does not appear to have been urged before that Court that in order to make Section 86 applicable in terms the suit must be against the State, by name, eonomine and not against the department or any other corporate body of foreign State. Therefore, on the construction of Section 86, which we have to deal with in this case, we find that this point was not urged and this point was not dealt with by the Division Bench of the Bombay High Court.

22. The Supreme Court had also occasion in another case as early as 1966 to discuss Section 86 of the Code in the case of Commr. of Income-tax, Andhra Pradesh v. Mir Osman Ali : [1966]59ITR666(SC) . There, the Supreme Court had occasion to refer to Sections 86 and 87 on the question of taxation of a foreign sovereign State. There the Supreme Court held at page 1265 of the report in paragraph 10 of the decision that in India there was no absolute prohibition against foreign States being sued in India but suits must be with the consent of the Central Government.

23. The Supreme Court had also dealt with this question in the case of Her Highness Maharani Mandalsa Devi v. M. Ramnarain Pvt. Ltd., : [1965]3SCR421 . There the question was when a suit was instituted against a firm in business name or a partnership name or a Maharaja who was entitled to immunity under Section 96, or could Section 86 of the Civil Procedure Code have any application in such a case? The Supreme Court held that Section 86 would have application. But that was on a different principle because the partnership was a business name or a firm name and partnership name is only a compendious way of describing the partners, suit against a partnership firm by name is in law and reality a suit against the partners. This is well settled in law. The Supreme Court observed that when the respondent sued the firm, it sued the Maharaja and all other partners. This situation is entirely different from the situation where a suit has been instituted against a legally constituted person different and distinct from a partner or from the State as such, as the situation in this case. Therefore, Section 86, in such a case, that is to say, in a case when a ruler of a State is being sued in the firm name, Section 86 clearly applies but that does not mean if a legally constituted or an incorporated body, separate and distinct from the State, is sued still then Section 86 would have application. The Division Bench of the Calcutta High Court had occasion to consider this case in the case of Royal Nepal Airline Corporation v. Monorama Mehar Singh Legha, : AIR1966Cal319 . There, a suit was instituted by the plaintiff, Sm. Monorama Mehar Singh Legha for recovery of a sum of Rs. 8,42,500 for damages, interest and other reliefs against Royal Nepal Airline Corporation & another. The question was that being a suit against Royal Nepal Airline Corporation whether the consent or sanction under Section 86 of the Code of Civil Procedure was still necessary. After referring to several decisions and the facts of that case, Chief Justice Bose, in the judgment at page 328 of the report at para 34 of the decision observed that even if the Nepal Airlines Corporation, the defendant in that case, had been, in fact, a corporate body, that would not have prevented the defendant or defendants or the Ambassador of the King of Nepal from claiming sovereign immunity on behalf of the King of Nepal provided the defendant could be regarded as a Department of the State of the Government of Nepal. On the facts of that case the learned Chief Justice had no doubt in holding that the said defendant was a department of the Government of Nepal and as such was entitled to claim immunity from the processes to exercise its jurisdiction in respect of the claim for damages which had been brought by the plaintiffs against the defendants. G. K. Mitter, J. who gave concurring judgment referred to several decisions andsought to state the principles that could be deduced from the said decision. One of the principles that could be said to be deduced from the decisions was that a suit would not lie against an agent of a foreign State where the act complained of was purported to be done as such an agent. But we are not concerned with this controversy. The other principle which the learned Judge noticed was that a suit would not lie against a department of the State. The learned Judge observed that it was doubtful whether immunity could be claimed by the other when the department was a corporation sole with a power to hold and acquire property and the right to sue and the liability to be sued. So far as English Courts were concerned the mere incorporation of a body would not deprive it of immunity if: it was a department of a State. An incorporated body which was a juristic personality carrying on business in the country where proceedings were started against it would be outside the 'protective umbrella of immunity.' The learned Judge further referred to the principle and observed that immunity could be claimed even when the foreign State did not figure as a defendant. A notice of motion to set aside the writ based on the certificate or affidavit of the Ambassador of the Foreign State to the effect that the defendant was a department of a State and was not a Corporation would be disposed of in favour of the Corporation. The effect of incorporation under a foreign law would have to be considered by the Court on the materials presented. The learned Judge referred to the facts of that case and came to conclusion that the appellant viz. Royal Nepal Airlines Corporation was not a body corporate but was a Department of the State and was entitled to claim immunity against His Majesty, King of Nepal. But the learned Judge at page 348 of the report, after referring to the decision of the Judicial Committee reported in (1938) 65 Ind App 182 : (AIR 1938 PC 165) observed as follows :

'134. When the plaintiff does not in plain terms sue a foreign ruler, ambassador or envoy Section 86 will not stand in his way but it will be open to the defendant to show that as a matter of fact the defendant is an alter ego of a ruler. A case of this type occurred in (1938) 65 Ind App 182 : (AIR 1938 PC 165) where the plaintiff brought a suit against the Gaekwar Baroda State Railway through its manager and engineer-in-chief. It was held by the Privy Council that the defendant was not a juristic person and the suit was in reality though not in form a suitagainst H. H. Gaekwar of Baroda. It was further held that the provisions of Sections 86 and 87 of the Code of Civil Procedure being imperative the suit could not succeed. This case also deals with the question of waiver of privilege, it had been argued before the Allahabad High Court that the Gaekwar of Baroda had waived his privilege by allowing the defendant Railway to defend the suit on its merits and produce evidence and take the chance of getting a judgment in his favour. This was rejected by the Judicial Committee, and Sir Lancelot Sanderson observed 'In the first place it appears that the summons was addressed to and served upon the manager of the State Railway. He filed a written statement containing the plea which has already been set out in full whereby he alleged that the suit was not filed against the proper party and was not maintainable. He applied without success that this issue should be tried as a preliminary issue. No one purported to appear in the suit on behalf of H. H. the Gaekwar of Baroda and there is no ground for saving that he waived his privilege.'

24. The learned Judge again observed in the penultimate paragraph of the decision that in that case no plea was taken in the written statement that the suit was against a ruler of a State and as such was not maintainable in the absence of consent of the Central Government to the institution of the suit. The learned Judge observed that speaking for himself he would not allow the matter to be put in issue unless the written statement was amended. If the plea was put forward in the written statement according to the learned Judge as issue as to maintainability would have arisen which might be tried as a preliminary issue in the suit it self. But the position would be different if the suit was in form against the ruler of a foreign State and the plaint did not show that the plaintiff had obtained the consent of the Central Government. Where the suit in form was not against a ruler of a State the disputed questions of fact hardly fit for determination on an application might arise and such questions should best be left for adjudication at the hearing of the suit.

25. In the aforesaid view of the matter in our opinion Section 86 of the Code of Civil Procedure cannot have any application in the facts and circumstances of the case. It is not a suit ex facie against a foreign State. Therefore, Section 86 of the Code in our opinion would not have any application. In coming to the conclusion that Section 86 is confined to the suit against a State by nameas such we are supported by the principles of interpretation that in making construction of a statute which is not explicit it should be in consonance with the general principle of international law. Under the general principles of international law, had not there been Section 86, a suit against a department of the State would still lie and it would be for the department of a foreign State to claim immunity. If such immunity is availed of, the Court is to grant such immunity. It would not be proper to curtail that right unless the legislative intent was clear and expressive on this point. In our opinion such Legislative intent was not explicit. Therefore, we are of the opinion that in the suit as stated in this case Section 86 has no application.

26. The next question that arises is that apart from Section 86 would the defendant/ respondent be still entitled to immunity and that raises further questions, namely, whether in the facts and circumstances of the case there is sufficient evidence in this case to hold that the D. S. R. line is part of the foreign State and incidentally naturally whether in respect of a department of a foreign State which is incorporated as a separate legal entity this theory of immunity wouldtill be applicable. That in our opinion should be a matter which should be decided in the suit as a preliminary issue that that is an issue which is taken in the written statement by the defendant. It was contended that if Section 86 of the Code of Civil Procedure would not bar the suit of this nature, then in view of the present trend of international law there was no immunity which could be claimed in respect of trading transaction. In this connection reference has been made to the observation of Lord Denning in the case of Trendtex Trading Corporation Ltd. v. Central Bank of Nigeria, (1977) 1 All ER 881 where referring to the claim of immunity the Master of Rolls ob-served to the doctrine of sovereign immunity which was based on international law. It was one of the rules of international law that a sovereign state should not be impleaded In the Courts of another sovereign state against its will. Like all rules of international law this rule is said to arise out of the conensus of the civilised nations of the world. All nations should agree to it. So it is a part of the law of nations. The Master of Rolls, however, observed that this notion of a consensus was a fiction. The nations were not in the least agreed on the doctrine of sovereign immunity. The Courts of every country differed in their application of itSome granted absolute immunity and others granted limited immunity with each defining the limits differently. There was no consensus whatever. Yet this did not mean that there was no rule of international law on the subject. It only meant that we differed as to what the rule was. Each country delimited for itself the bounds of sovereign immunity. Each created for itself the exceptions from it. Then the Master of Rolls referred to the theory and the question of changes. The Master of Rolls noted that in the last 50 years there had been a complete transformation in the functions of a sovereign State. According to the Master of Rolls, nearly every country now is engaged in commercial activities. It has its departments of State or created its own legal entity to go into the market places of the world. The Master of Rolls was of the view that in respect of trading transactions or commercial transactions the government did not enjoy immunity. The Master of Rolls based his decision on the conclusion that in respect of commercial transaction the government did not enjoy immunity even though an incorporated body might become a part of the State. Lord Justice Stephenson on the other hand held that he was not satisfied on the evidence as to the claim of immunity by the department of a foreign state. Lord Justice Shaw, other learned member of the Court of Appeal agreed with Lord Denning. See in this connection also the observations of Lord Denning MR in the case of Thai-Europe v. Govt. of Pakistan, (1975) 3 All ER 961 at page 965.

27. Learned advocate for the appellant contended that we should bring our international law in harmony with the trend of international law and as such even if the present applicant was a department of a foreign State, it was not entitled to immunity in respect of commercial transactions which indisputably is the case in the facts and circumstances of this case. He drew our attention to the directive principles of Article 51(c) of the Constitution in support of his contention. It is to be noted in this connection that it is yet to be established as a definite proposition of law in India as to whether the present accepted trend of international law is that the foreign state does not enjoy immunity in respect of commercial transactions. Speaking for myself I would like to hold that foreign States do not enjoy such immunity. That would be in consonance with justice, equity and good conscience having regard to the various trading or nongovernmental activities carried on by theGovernments. In this respect it might be noted that apart from the decisions of the western countries, namely, America, Britain and Europe, yet we do not have clear picture as to the decision on the question of International law in Eastern Europe or other Asian countries. Therefore, what is the actual position of international law on this aspect is not yet clear and at least there is no clear pronouncement of the highest authority in this country as to the present trend of law. Therefore, if such an issue arises, it should be tried as a preliminary issue in the suit giving both the parties opportunity to make their submissions and adduce evidence if they so wish to adduce evidence on this point. We must, however, note that the learned advocates of both the parties with their labour and industry produced before us a large number of authorities on this aspect of the matter and also on the aspect as to whether there is sufficient evidence in this case or acceptable evidence in this case that the respondent was a department of a foreign state. In this connection the German Constitution was referred and the certificate of the Consul-General was also referred to.

28. It is not necessary at this stage to decide whether the respondent is claiming Immunity as part of the German Democratic Republic and as such entitled to immunity. Further it is premature at this stage to contend whether there is immunity as such in respect of commercial transaction involved in this case. In the view we have taken, we are, therefore, on that ground, not referring to the numerous decisions which were cited before us from both sides. We, therefore, hold that Section 86 of the Civil Procedure Code would not be a bar in this case for the reasons mentioned earlier. But whether the defendant would be entitled to sovereign immunity in international law, a plea can be taken in the written statement. If such a plea is taken, then that plea should be decided as a preliminary issue for trial.

29. Our attention was also drawn to a decision of the House of Lords in the case of Congreso del Fartido, (1981) 2 All ER 1064 where the House of Lords came to the conclusion 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. This decision, as we have mentioned before, represents the trend of international law as understood in England. The effect of this decision will haveto be decided, if the question arises, as stated before, in the trial of the suit.

30. In the premises, the order and judgment of the learned trial Judge are set aside and if such issue of sovereign immunity is raised, then the same should be decided in accordance with international law as the Court thinks fit on appropriate materials. In that view of the matter, costs of this appeal will be costs in the cause.

31. At the conclusion of the judgment, we were informed that a Division Bench of this Court in a recent decision has upset a decision of one of us in the case of Cekop v. Asian Refractories Ltd., (1969) 73 Cal WN 192 where it was in fact held that the certificate granted was not sufficient. In that decision there was no contention raised whether in case the suit was not filed against the State as such by name, Section 86 would have application. But we do not have the advantage of looking into the judgment of the Division Bench in this matter about which mention was made as indicated above.

32. Mr. Tarun Basu asks for leave to appeal to the Supreme Court. In view of the points involved in this case, we are of the opinion that the case involves substantial question of law of general importance and the said question needs to be decided by the Supreme Court We accordingly grant a certificate. Let a certificate issue expeditiously. Stay of the operation of the order as asked for by the learned counsel for the respondent is granted for a period of four months from date.

Suhas Chandra Sen, J.

33. I agree.


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