Dispute Resolution Hotline
February 07, 2013
File Sovereign Immunity: is not so immune anymore
The division bench of the Bombay High Court ("Bench") in a recent judgment delivered by Justice D Y Chandrachud and Justice A A Sayyed has eased the path for Sharpoorji Pallonji and Company ("the Company") for recovery of a sum of INR 59.22 lakhs ("Debt") with interest from Qatar Airways ("Qatar") and denied the benefit of sovereign immunity to Qatar.
BRIEF FACTS OF THE CASE
Qatar had engaged the services of the Company for interior decoration of its workplace. The payment due for such services was in arrears and therefore the Company instituted a summary suit against Qatar before the Single Judge, Bombay High Court ("Court") under Order XXXVII of the Civil Procedure Code, 1908 ("CPC"), for the recovery of the Debt. Qatar raised a preliminary objection as to whether such suit would be maintainable against it since it is a 'Foreign State' and that requisite permission for instituting a suit against a 'Foreign State' had not been obtained from the Central Government under Section 86 of the CPC.
The Court dismissed the objection raised by Qatar stating that it was not necessary to obtain consent as contemplated by Qatar to proceed with the suit. Moreover, the Union Ministry of External Affairs had already stated that consent to institute the suit was not necessary in this case and therefore the suit was held to be maintainable.
Qatar was aggrieved by the aforesaid decision and instituted an appeal before the Bench. The appeal was however dismissed and the reasons delivered by the Court have been discussed below.
SOVEREIGN IMMUNITY IN INTERNATIONAL LAW
Sovereign immunity is a well-recognized principle of public international law. It flows from the maxim "par in parem non habet imperium" which basically states that one sovereign state may not exercise jurisdiction over another sovereign state. The principle covers the entire judicial process, from the initiation or institution of proceedings up to the stage of orders/ decisions by a court as well as their execution.
PROVISION FOR SOVEREIGN IMMUNITY UNDER INDIAN LAW
Section 861 of the CPC elucidates upon the law relating to sovereign immunity/consent to be obtained in suits instituted against 'Foreign State'. An entity will qualify as a 'Foreign State' depending upon the nature of its constitution and the extent of 'control' the government exercises on that entity.
JUDICIAL PRECEDENTS; WHAT WAS HELD?
Consent not required
Qatar contended that it is a company owned and controlled by the State of Qatar and its ruling family and therefore it is a 'Foreign State' within the meaning of Section 86 of CPC. It was the contention of Qatar that the suit instituted in the original jurisdiction of the Court was not maintainable in the absence of permission by the Central Government,
The Company objected to the maintainability issue raised by Qatar stating that they had sought the consent of the Union Government in the Ministry of Law and Justice in a response to which the Union Ministry of External Affairs communicated that upon consultation with the Legal and Treaties Division they had concluded that Qatar does not fall within the purview of Section 86 of the CPC and therefore the grant of permission for institution of the recovery suit was not required.
The Court dismissed Qatar's appeal while stating the following reasons for its decision in its oral judgment:
The basic premise on which the Bench dismissed the appeal is very clear that Qatar is a company incorporated under the laws of Qatar and is a juristic entity which cannot be equated with a 'Foreign State'. This judgment has reiterated the often cited principle that a company has a distinct personality independent of its shareholders. Moreover, the Court has clarified that no one can evade responsibilities arising out of transactions of private and commercial nature by seeking protection under the principles of sovereign immunity for sovereign states.
The decision of the Bench is a clear turnaround from the views expressed by a concurrent division bench of the Delhi High Court in the case of Mansoor Mumtaz and Ors. v. Saudi Arabian Airlines Corporation7 wherein the Delhi High Court had gone into the aspect of control of Saudi Arabian Airlines (which vested with the Kingdom of Saudi Arabia). The division bench of the Delhi High Court held that since the control over the Defendant Airlines Corporation is with the State, merely because it is carrying on an independent work will not take it away from the purview of sub-section 1 to Section 86 and therefore consent of Central Government will be required to determine that it was a Foreign State. In the present case, the Bombay High Court has not gone into the fact whether or not the Control of Qatar Airways rests with a Foreign State but has based its decision on the premise that a company is a distinct legal entity separate from its shareholders and in a way refused to lift the corporate veil of Qatar Airways.
Ironically the case of Mansoor Mumtaz was not discussed in the present judgment rendered by the Bombay High Court.
1 "86. Suits against foreign Rulers, Ambassadors and Envoys? (1) No foreign State may be sued in any Court otherwise competent to try the suit except with consent of the Central Government certified in writing by a Secretary to that Government:
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