1993 (11) TMI 245 - SC - Indian Laws

Summary

Issues Involved:
1. Applicability of Section 86 of the Code of Civil Procedure (CPC) regarding the immunity of a foreign state.
2. Determination of whether the appellant is an instrumentality of the German Democratic Republic.
3. Requirement of Central Government's consent for suing a foreign state.
4. Examination of commercial contracts within the purview of Section 86.
5. Burden of proof for claiming immunity under Section 86.

Issue-Wise Detailed Analysis:

1. Applicability of Section 86 of the Code of Civil Procedure (CPC) regarding the immunity of a foreign state:

The appellant argued that it was an instrumentality of the German Democratic Republic, a recognized sovereign foreign state, and thus the suit could not be entertained without prior consent of the Central Government as required by Section 86 of the CPC. The court emphasized that Section 86 aims to give effect to the principles of International Law, providing a qualified privilege to foreign states, which can only be sued with the Central Government's consent.

2. Determination of whether the appellant is an instrumentality of the German Democratic Republic:

The appellant produced a certificate from the Consul-General of the German Democratic Republic and the Constitution of the German Democratic Republic. Article 12 of the Constitution stated that various enterprises, including ocean shipping, were nationally-owned property. Based on this, the court concluded that the appellant should be deemed a department of the German Democratic Republic, thus entitled to claim immunity under Section 86.

3. Requirement of Central Government's consent for suing a foreign state:

The court highlighted that Section 86(1) clearly states that no foreign state may be sued in any court except with the consent of the Central Government, certified in writing. Sub-section (2) prescribes that such consent shall not be given unless the case falls within specific clauses. The court reiterated that this provision acts as a bar on the court's power to entertain suits against foreign states without such consent.

4. Examination of commercial contracts within the purview of Section 86:

The respondent contended that Section 86 should not apply to commercial contracts. However, the court referred to sub-section (2)(b) of Section 86, which requires consent even for commercial or trading contracts. The court concluded that commercial contracts entered on behalf of a foreign state are not beyond the purview of Section 86, and the Central Government's consent is necessary.

5. Burden of proof for claiming immunity under Section 86:

The court noted that the initial onus of establishing the right to immunity lies with the foreign state or its instrumentality. The appellant had discharged this burden by producing relevant constitutional provisions and certificates. The court emphasized that the Central Government must consider requests for consent objectively and grant it if a cause of action exists, while also protecting foreign states from frivolous litigation.

Conclusion:

The court allowed the appeal, setting aside the Division Bench's order and restoring the trial court's decision. The suit filed by the respondent was not entertained due to the lack of Central Government consent as required by Section 86. The court underscored that the question of entertaining a suit against a foreign state should be addressed at the earliest opportunity to avoid unnecessary litigation and uphold the purpose of Section 86.