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2013 (2) TMI 340 - HC - Companies LawMaintainability of Suit of recovery on non obtaining of permission of the Union Government under Section 86 of the CPC - Recovery of dues together with interest based on a contract for carrying out the work of interior decoration at certain offices of the Appellant - Held that - Section 86 of the CPC applies to a suit instituted against a corporate body which carries on trading or business activities so long as the ownership of the share capital vests in a foreign State. Where section 84 confers a right on a foreign State to sue, sec 86(1) in substance imposes a liability on foreign States to be sued, though this liability is circumscribed and safeguarded by the limitations prescribed by it. That is the effect of s. 86(1) In deciding as to whether a particular foreign State is a foreign State for the purpose of Section 86 recognition de jure or de facto by the Union Government had the same consequence. Foreign companies carry on business in India. They bring investment, finance and trade. Indian companies carry on business abroad, taking with them investment and our enormous human resource base. The contractual and commercial obligations which they assume are governed by the discipline of the law. In their commercial and business operations such corporate entities cannot claim an immunity to civil actions. Qatar Airways carries on commercial airline operations. It brings and takes passengers and cargo to and from India. It operates offices, engages employees, solicits business and carries on activities of a commercial airline here, as abroad. The claim is founded on a purely contractual and commercial dealing between the Appellant and the Respondent. The Appellant is not a foreign State within the meaning of sub- Section (1) of Section 86. It has a distinct legal personality of its own which finds recognition in the contractual relationships into which it enters. Those contractual relationships occasioned by its business activities in India would be subject to the jurisdiction of a competent court in this country. For these reasons, the learned Single Judge was not in any error in holding that the suit was maintainable. The Union Government has been correct in its assertion that the question of permission of the Union Government did not arise and, as urged by ASG, that the provisions of Section 86 are not attracted. Appeal stand dismissed. On the request of Counsel appearing on behalf of the Appellant and in order to enable the Appellant to seek recourse to its remedies against this judgment continue the stay granted on 8 August 2012 for a further period of four weeks from today. In view of the dismissal of the Appeal, the Notice of Motion taken out in appeal does not survive.
Issues Involved:
1. Maintainability of the suit without permission under Section 86 of the CPC. 2. Whether the Appellant, a company incorporated in Qatar, qualifies as a "foreign state" under Section 86 of the CPC. 3. The applicability of the doctrine of sovereign immunity to the Appellant. 4. The interpretation and application of relevant precedents, including decisions of the Supreme Court and High Courts. Detailed Analysis: Issue 1: Maintainability of the Suit Without Permission Under Section 86 of the CPC The Respondent instituted a suit under Order XXXVII of the CPC for the recovery of Rs. 59.22 lakhs based on a contract for interior decoration work. The Appellant contested the suit's maintainability, arguing that permission from the Union Government under Section 86 of the CPC was required. The learned Single Judge ruled that the suit was maintainable without such permission. Issue 2: Whether the Appellant Qualifies as a "Foreign State" Under Section 86 of the CPC The Appellant, a Qatari company, argued that it is a "foreign state" within the meaning of Section 86 of the CPC, as it is owned and controlled by the State of Qatar and its ruling family. The Respondent sought consent from the Union Government, which was denied twice, concluding that Qatar Airways does not fall within the purview of Section 86. Section 86(1) of the CPC states that no foreign state may be sued without the Central Government's consent. The provision aims to regulate the liability of foreign states to be sued in Indian courts. The Supreme Court's judgment in Mirza Ali Akbar vs. United Arab Republic emphasized that Section 86 modifies the doctrine of immunity under International Law, allowing foreign states to be sued with the Central Government's consent. Issue 3: Applicability of the Doctrine of Sovereign Immunity to the Appellant The Appellant's counsel cited the Division Bench decision in Kenya Airways vs. Jinibai B. Kheshwala and the Supreme Court's decision in Ethiopian Airlines vs. Ganesh Narain Saboo, arguing that Section 86 applies to corporate bodies owned by foreign states. However, the Union Government and Respondent contended that Qatar Airways operates as a corporate entity in the commercial sphere, and thus, Section 86 does not apply. The Supreme Court in Ethiopian Airlines held that a commercial airline is not entitled to sovereign immunity, aligning with international law principles and judicial decisions in other jurisdictions. The Court emphasized that commercial activities undertaken by state-owned entities should be subject to the same legal rules as private entities. Issue 4: Interpretation and Application of Relevant Precedents The Court analyzed various precedents, including: - Mirza Ali Akbar vs. United Arab Republic: The Supreme Court held that Section 86 modifies the doctrine of sovereign immunity, allowing foreign states to be sued with the Central Government's consent. - Veb Deutfracht Seereederei Rostock vs. New Central Jute Mills Co. Ltd.: The Supreme Court held that a department of a foreign state could be sued with the Central Government's consent. - Kenya Airways vs. Jinibai B. Kheshwala: The Division Bench held that Kenya Airways, wholly owned by the Government of Kenya, would be entitled to immunity under Section 86, but had waived this right by participating in the proceedings. - Ethiopian Airlines vs. Ganesh Narain Saboo: The Supreme Court held that a commercial airline is not entitled to sovereign immunity, emphasizing that commercial activities should be subject to legal rules applicable to private entities. The Court concluded that the Appellant, Qatar Airways, is a corporate entity with a distinct legal personality, engaging in commercial activities in India. Thus, it does not qualify as a "foreign state" under Section 86, and the suit is maintainable without the Central Government's consent. Conclusion: The Court upheld the learned Single Judge's decision, ruling that the suit against the Appellant is maintainable without permission under Section 86 of the CPC. The Union Government correctly asserted that the provisions of Section 86 are not attracted. The appeal was dismissed, and the stay on the hearing of the Summons for Judgment was continued for four weeks to allow the Appellant to seek further remedies. The Notice of Motion in the appeal was also dismissed.
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