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TMI Blog2013 (2) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... ant is a juristic entity, a company incorporated under the laws of Qatar. The Appellant has stated that the Company is a 'closed' Qatari share holding company incorporated in accordance with the provisions of Commercial Companies Law No. 11 for the year 1981. The Memorandum of Association and transfer of Qatar Airways Company from a limited liability company to a closed share holding company has been placed on record. The objectives of the Company as disclosed therein are as follows : "1. Air transport of passengers, goods, mail, luggage and animals. 2. To carry out projects of aviation works, tourism and Air Cargo. 3. Buying, selling and hiring aircrafts and importing the necessary equipment and spare parts for its maintenance. 4. To establish branches and agencies of the Company in and outside the State of Qatar for the purpose of booking tickets and marketing and offering of air transportation. 5. To carry out all permissible air services such as air survey, photography and the like. 6. To participate with other entities, corporations and companies wherever such participation realises profits to the company. 7. To purchase, sell, mortgage, hire lands and buildings to achi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Counsel appearing on behalf of the Appellant submits that: (i) 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; (ii) In the decision of a Division Bench of this Court in Kenya Airways vs. Jinibai B. Kheshwala, AIR 1998 BOMBAY 287 it was held that an airline of which ownership and control vests in a foreign State would fall within the purview of the protection conferred by Section 86, though in that case it was held that the airline had in fact waived the protection conferred by Section 86 by participating in the proceedings without demur for a long period of time; (iii) The Supreme Court in EthIopian Airlines V. Ganesh Narain Saboo AIR 2011 SC 3495 held that Section 86 is not applicable in the context of special legislation enacted by the Parliament subsequently, namely, the Carriage by Air Act, 1982 and the Consumer Protection Act, 1986. In the absence of the field being governed by special legislation of the kind involved in the Ethiopian Airlines case, the provisions of Section 86 would continue to apply and consequently in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment 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 preceding 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86 was first considered in a judgment of a Constitution Bench of the Supreme Court in Mirza Ali Akbar vs. United Arab Republic & Anr. AIR 1966 SC 230. That was a case where a suit was instituted inter alia against the United Arab Republic and a department of the Government of Egypt at Cairo. Explaining the provisions of Section 86 the Supreme Court held that Parliament has by the statute modified to a certain extent the doctrine of immunity recognized by International Law and a foreign State against whom an action is brought could not rely upon a wider doctrine of sovereign immunity under International Law since the municipal Courts in India would be governed by the law enacted by Parliament. The Supreme Court held as follows: "The effect of the provisions of s. 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. It 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 provide for its own rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in deciding upon applications for permission under Section 86, noting that Section 86 should not be stretched to a point where a company or corporation which carries on business or trade should be immune to actions in a competent Court of jurisdiction in India. In that context the Supreme Court observed as follows : "While considering the question of grant or refusal of such consent, the Central Government is expected to examine that question objectively. Once the Central Government is satisfied that a cause of action has accrued to the applicant against any foreign company or corporation, which shall be deemed to be a foreign State, such consent should be given. The immunity and protection extended to the foreign State on the basis of International Law should not be stretched to a limit, so that a foreign company and corporation, trading, within the local limits of the jurisdiction of the Court concerned, may take a plea of Section 86 although prima facie it appears that such company or corporation is liable to be sued for any act or omission on their part or for any breach of the terms of the contract entered on their behalf. It is neither the purpose nor the scope of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under Section 86, the Division Bench held that it was not entitled to claim the benefit of the protection and the suit was maintainable. As we shall indicate hereafter, the judgment of the Division Bench in Kenya Airways has been construed by the Supreme Court in the judgment in Ethiopian Airlines (supra) as a judgment which prima facie held that Kenya Airways being a State entity would be entitled to immunity under Section 86 but that it had nevertheless waived this immunity by failing to raise the defence at an appropriate time. 14. The most recent of the decisions of the Supreme Court on the subject is that in Ethiopian Airlines (supra). The judgment of the Supreme Court, of a Bench of three learned Judges, arose out of a reference made to a larger Bench. A complaint was filed before the State Consumer Disputes Redressal Commission in respect of a claim arising out of a consignment which was booked on Ethiopian Airlines for delivery in Tanzania. The State Commission held that the complaint was not maintainable. In Appeal, the National Consumer Disputes Redressal Commission held that Section 86 of the CPC was not applicable to a proceeding under the Consumer Protection Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration Ltd. v. Central Bank of Nigeria , the Court held that the Central Bank of Nigeria was not entitled to plead sovereign immunity because, according to International Law principle of restrictive immunity, a state-owned entity is not entitled to immunity for acts of a commercial nature, jure gestionis. The Court noted that "if a government department goes into the market places of the world and buys boots or cement - as a commercial transaction - that government department should be subject to all the rules of the market place." The Court also noted an "important practical consideration." stating that foreign sovereign immunity, "in protecting sovereign bodies from the indignities and disadvantages of that process, operates to deprive other persons of the benefits and advantages of [the judicial] process in relation to rights which they posses and which would otherwise be susceptible to enforcement." As the court stated, the principle of restrictive immunity is "manifestly better in accord with practical good sense and with justice." 72. On careful analysis of the American, English and Indian cases, it is abundantly clear that the Appellant Ethiopian Airlines must be held acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de or business is carried on by a State through its agents appointed exclusively for that purpose, and the agents carry it on entirely on behalf of the State and not on their own account, there would be no difficulty in holding that the income made from such trade or business is the income of the State. But difficulties arise when we are dealing with trade or business carried on by a corporation established by a State by issuing a notification under the relevant provisions of the Act. The corporation, though statutory, has a personality of its own and this personality is distinct from that of the State or other shareholders. It cannot be said that a shareholder owns the property of the corporation or carries on the business with which the corporation is concerned. The doctrine that a corporation has a separate legal entity of its own is so firmly rooted in our notions derived from common law that it is hardly necessary to deal with it elaborately; and so, prima facie, the income derived by the appellant from its trading activity cannot be claimed by the State which is one of the shareholders of the corporation. ......... "19. In this connection, we may usefully refer to the obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity which was regarded having regard to the provisions of the Constitution of the German Democratic Republic as a department of the foreign State. The subsequent decision in Ethiopian Airlines now makes it abundantly clear that a corporate entity which carries on business or trade in India does not fall within the protection of the doctrine of sovereign immunity as embodied in Section 86 of the CPC. In the world today, corporate bodies both Indian and foreign carry on trade, commerce and business across geographical and national boundaries. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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. 20. For these reasons, we do not find that the learned Single Judge was 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. 21. The Appeal shall accordingly stand dismissed. There shall be no order as to costs. 22. On 8 August 2012, the Division Bench presided over by the learned Chief Justice had while standing over the hearing to 11 September 2012 stayed in the meantime the hearing of the Summons for Judgment in the Summary Suit. On the request of Counsel appearing on behalf of the Appellant and in order to enable the Appellant to seek recourse to its remedie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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