9911796707
TMI Blog1998 (4) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... owner and as such landlord in respect of a flat on the South-West side on second floor of Dunkeld Building, 8, Harkness Road, Bombay 400 006 alongwith a garage located on the ground floor of the said building. Under an agreement of leave and license dated 11th of June, 1974 plaintiff Nos. 1 and 2 permitted original defendant one Mr. Ben Mbrani, the Manager in India of East African Airways posted at Bombay and having a temporary assignment in India, to occupy the said flat on leave and licence basis for a period of six months commencing from 1st June, 1974. Under Clause 4 of the agreement, the licence was given to defendant No. 1 for use of the flat and the garage for his personal use only and for no other purpose. The flat was to be used for his personal residence only. Clause 7 of the agreement provided that in case the licensee commits breach of any of the terms and conditions of the licence the licensor shall become entitled to revoke the licence notwithstanding the fact that the period of licence had not expired and upon revocation of the licence the licensee and his family were to remove themselves from the flat and garage. On the date of the execution of the leave and licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y requires premises for its offices and its staff and also for the residence of its Manager in the different countries in which it operates. Such Company has its Managers changing from time to time in every country where its offices are situated. The Flat required inter alia by such company for its Manager is always occupied by the Manager for the time being. This is always known and conveyed to the persons from whom the Flat is taken for the purpose of occupation of the Manager of such Airways-Company. The plaintiffs were never known to the defendant No. 1 and Eastern African Airways at any time before the suit flat was taken by East African Airways from the plaintiffs in or about June, 1974. East African Airways were in search of flat for the purpose of residence for their Manager-India in or about June, 1974. The plaintiffs and East African Airways were complete strangers to one another. The plaintiffs were desirous of letting out the suit flat at the best available rent to any respectable persons. The deal in respect of the suit flat was entered into between East African Airways and the plaintiffs in or about June, 1974 through Estate Brokers, Bhagwandas T.M. the Agents of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed on the 23rd of November, 1978. 6. Defendant No. 2 gave an undertaking not to alienate, dispose of or part with possession of the suit flat to any person, save and except the employees of the third defendant. The third defendant in turn, gave an undertaking not to alienate, encumber or part with possession of the suit flat or induct any person in the suit flat, save and except an officer of the defendant company who will be allowed to occupy the suit flat merely in his capacity as an employee of the third defendant and without having any right, title or interest in the suit premises. Both the defendant Nos. 2 and 3 gave an undertaking to deposit in Court an amount of ₹ 2,000/- per month. Liberty was given to the plaintiff to withdraw the amounts so deposited. A statement was made on behalf of the third defendant that if any officer is allowed to reside in the suit premises by the third defendant in place and stead of second defendant, the third defendant gave an undertaking in the Court to procure and to file in Court an undertaking from such future officer not to part with possession or induct any third party in the suit premises and that such undertaking shall be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised on behalf of the plaintiff in the following terms: The learned Counsel for the plaintiff informs the Court that without prejudice to his contention that section 86 of the Code of Civil Procedure is not attracted to the suit as framed, the plaintiff has now applied to the Central Government for its consent to continue this suit even if section 86 of the Code of Civil Procedure is held to be applicable, 10. By a separate order passed on the 1st of December, 1994 the learned Judge declined the request made on behalf of the defendants to try the aforesaid issues as preliminary issues by observing that the issue had been raised after almost the period of sixteen years. The said issue was directed to be tried alongwith the other issues at the hearing of the suit. The aforesaid order was carried by the third defendant to the Supreme Court. In the order passed by the Supreme Court on 11th August, 1995 a reference is made to the case of ( Veb Dautrfraght Seereederi Restock (D.S.P. lines) Department of the German Democratic Republic, New Central Jute Mills Co. Ltd. and another ), wherein it has been observed, as under:- In the present case, the appellant having been held to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government of Republic of Kenya. Neither is the property of the third defendant, nor its ownership, vests in Government of Kenya. Third defendant, therefore, cannot be categorised as foreign State. Third defendant, therefore, was not entitled to the protection of section 86 of the Code of Civil Procedure. 13. Taking exception to the aforesaid judgment and order dated 26th of February, 1996, the third defendant has preferred the present appeal. 14. We have heard the learned Counsel appearing for the contending parties at considerable length. What strikes us, at the out set, is the fact that the defendants have raised the issue in regard to immunity based on the provisions of section 86 of the Code after a lapse of almost sixteen years from the date of filing of the suit. The suit is filed on the 29th of July, 1978 whereas the present contention is, for the first time, raised on the 24th of November, 1994. In the meanwhile, defendants have virtually submitted themselves to the jurisdiction of the Court by appearing in the suit. Not only they have appeared in the suit but they have also participated in the Notice of Motion No. 1012 of 1978 taken out by the plaintiffs for app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onally abandons it. ... The claim of the appellant to exemption could be sustained only on the doctrine of promissory estoppel and this doctrine could not be said to be so well defined in its scope and ambit and so free from uncertainty in its application that we should be compelled to hold that the appellant must have had knowledge of its right to exemption on the basis of promissory estoppel at the time when it addressed the letter dated 25th June, 1970. In fact in the petition as originally filed, the right to claim total exemption from sales tax was not based on the plea of promissory estoppel which was introduced only by way of amendment. Moreover, it must be remembered that there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that it is not a correct statement; there is no such maxim known to the law. ..... 15. As far as section 86 of the Code is concerned, the same is not a new provision. The same has been on the statute right from its inception. Section 86 in the present form has been on the statute after its amendment in 1976 with effect from 1st of November, 1977. The defendants, in their written sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consent of the Central Government, is maintainable. 17. Mr. Presswala, who appears on behalf of the appellant/defendant No. 3 has submitted that the doctrine of Sovereign Immunity is that a foreign State cannot be sued or impleaded in the courts of another foreign State against its will. This doctrine is applicable to the foreign Government or its department of State or anybody which can be regarded as its alter ego or organ of Government. Section 86(2)(b) of the Code also recognises that this immunity is available to a State. Thus, sovereign immunity as restricted by section 86 is available to a foreign State which trades by itself or by setting up separate legal entities such as a company incorporated under the Companies Act. Any plea of Sovereign immunity by a corporate undertaking of a Foreign State has to be examined on the basis of materials produced on behalf of such undertaking or Corporation. Thus, what is required to be seen is whether the body incorporate is the alter ego or second self of the foreign State. In countries like Great Britain, U.S.A., Germany the doctrine of sovereign immunity is restricted in the sense that it is applicable to sovereign Acts and not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 994 issued by the Acting High Commissioner, Kenya High Commission, New Delhi to the following effect: This is to confirm that Kenya Airways is a Company incorporated in Kenya in accordance with the laws of Kenya, with the Government of the Republic of Kenya being the only shareholder and as such Kenya Airways is an Instrumentality/Department of the Government of Kenya. 20. Mr. Presswala has placed strong reliance on a decision of the Supreme Court in the case of Veb Deaufracht Seereederei Restock (D.S.P. Lines) a Department of the German Democratic Republic v. New Central Jute Mills Co. Ltd. and another, where it has been observed, as under :- 5. One of the principles of International Law is that every sovereign State respects the independence of every other foreign State. This absolute independence and the international comity underlines, the relationship between sovereign States. The object of section 86 of the Code is to give effect to the principles of International Law. But, in India it is only a qualified privilege because a suit can be brought with the consent of the Central Government in certain circumstances. Just as an independent sovereign State may statutori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The stand of the respondent is that as the dispute has arisen in connection with a commercial contract section 86 shall not be applicable. According to the respondent, the framers of the Code, while recognising the sovereignty and the immunity of the foreign States on principles recognised by the International law, never purported to give immunity to the breach and contravention of the terms of the contract entered on behalf of the foreign State, which has nothing to do directly or indirectly with the sovereignty of the one State or the other but relates to commercial trade between the two States. There cannot be any conceivable object to keep such contracts within the scope of section 86. As a first impression, this looks attractive. But, from bare reference to sub-section (2)(b) of section 86, it shall appear that it requires such consent of the Central Government even in respect of agreements relating to commercial or trading contracts, because it says that such consent shall not be given, unless it appears to the Centra! Government that the foreign State ..... by itself or another, trades within the local limits of the jurisdiction of the Court . If sub-section (2)(b) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defendants are a corporate body? In my view that would be plainly wrong. In these days the Government of a sovereign State is not as a rule reposed in one personal sovereign; it is necessarily carried out through a complicated organization which ordinarily consists of many different ministries and departments. Whether a particular ministry or department or instrument, call it what you will, is to be a corporate body or an unincorporated body seems to me to be purely a matter of governmental machinery. 10. ..... But, at the same time, it must be impressed that any plea of immunity raised by a corporate undertaking of a foreign State, has to be examined on the basis of materials produced on behalf of such undertaking or corporation. The initial onus of establishing that such corporation or undertaking had right to immunity, must be discharged. If it satisfied the Court that because of any constitutional provision, although such corporation has its separate legal entity, still it shall be deemed to be a department of the State for purpose of immunity, then only the onus will shift to the plaintiff to disprove any such claim. 21. Based on the aforesaid decision Mr. Presswala h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsformation in the function of a sovereign State has modified the rule of the international law relating to absolute immunity. Most of the countries have replaced it by a doctrine of restrictive immunity. This doctrine gives immunity to acts of a Governmental nature, described in Latin as jure imperil, but no immunity to acts of a commercial nature, jure geslionis. Reference is made by the Counsel to the development in this modern rule of law in the English Courts. In Rahimtoola v. The Nizam of Hyderabad and others, 1957(3) AII.E.R. 441, Lord Denning said that if the dispute concerns, for instance, the commercial transactions of a foreign Government, whether carried on by its own departments or agencies or by setting up separate legal entities, and it arises properly within the territorial jurisdiction of English Courts, there is no ground for granting immunity. Again in Thai-Eurupe Tapioca Service Ltd. v. Government of Pakistan, 1975(3) AII.E.R. 961, it was stated that a foreign sovereign has no immunity when it enters into a commercial transaction with a trader in England. In Trendex Trading Corporation Ltd. v. Central Bank of Nigeria, 1977(1) AII.E.R. 881 there is a detailed dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciple as the absolute privilege, the dignity and independence of the Ruler which would be endangered by allowing any person to sue him at pleasure and the political inconveniences and complications which would be the result. Section 433 constituted a modification of the international rule for Indian purposes as expressed by Strachey, J., in Chandulal Khush'ji v. Awad Bin Umar Sultan Nawaz Jung Bahadur, 1986(21) Bombay 351. The Code of 1882 enacted the same provisions as of the Code of 1877. Under the unamended Code of 1908 any such Prince or Chief, and any ambassador or envoy of a foreign State could be sued with the requisite consent, but not without such consent, in a competent Court in India. Again the same three conditions were specified in section 86(2) of the Code. The giving of the consent was circumscribed and made dependent on the satisfaction about the existence of one of the conditions. There was a legislative extention of the jurisdiction over a sovereign though under the International Law even at that time, there was absolute immunity. The sovereigns, whether their powers in their States be absolute or limited, could be sued in England on their obligations whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Art. 12 thereof, Sinha, C.J. (on behalf of himself, S.K. Das; P.B. Gajendragadkar; A.K. Sarkar; K.N. Wanchoo and N. Rajagopala Ayyangar, JJ., has not answered the second question by observing, as follows :--- 24. In view of this answer, we do not consider it necessary to answer the second question as that would have arisen only if the first question had been answered in the affirmative. Justice Hidayatullah, J., has answered the second question by observing, as under :- :31. ..... In my opinion, the State Trading Corporation cannot be said to be a citizen either by itself or by taking it as the aggregate of citizens that nationality of a corporation is a different concept not to be confused with citizenship of natural persons, that the word 'citizen' in Article 19(1) sub-Clause (f) and (g) refers to a natural person, that State Trading Corporation is really a Department of Government behind the Corporate veil and that for all these reason the two questions must be answered in favour of the objectors... ... 65. The next question is whether the State Trading Corporation is a department or organ of Government notwithstanding the formality of incorporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as either a department or an organ of the Government of India. It is a circumstances of accident that on the date of its incorporation and thereafter its entire share-holding was held by the President and the two Secretaries to the Government of India. Justice Das Gupta, has concurred with justice J. C. Shah, by observing, as follows:-- 88. On the other question that has been referred, I agree with the conclusion of my learned brother Shah, J., that, the State Trading Corporation is not in substance a department and organ of the Government of India. As I entirely agree with the reasoning on which he has based this conclusion, I do not propose to discuss the matter further. 24. It would appear that as per Hidayatullah, J., the State Trading Corporation is a department of Government. According to him, if one were to lift the veil of incorporation it will be found that the entire share capital is subscribed by the Government of India, the shareholders are the President of India and two Secretaries to the Government in their official capacities and that its management is a governmental function for the benefit of the nation. None of the share holders holds a share or shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the acts alleged to have been performed by IAC after the coming into effect of R.C.C. Resolution 369. ... ... 27. The aforesaid decision indicates that when a Government Company performs a sovereign function such a removal of aircraft, during war, was a sovereign function which entitle immunity whereas when the aircraft is used for commercial purposes the same would not be a sovereign function and hence would not be entitled to State immunity. 28. Mr. Presswala further cited a case of Trendtex Trading Corporation Ltd. v. Central Bank of Nigeria, 1977(1) AII.E.R. 881 which has explained alter ego or organ of Government, as follows: If we are still bound to apply the doctrine of absolute immunity, there is, even so, an important question arising on it. The doctrine grants immunity to a foreign Government or its department of State, or anybody which can be regarded as an 'alter ego or organ' of the Government. But how are we to discover whether a body is an 'alter ego or organ' of the Government. The cases on this subject are difficult to follow, even in this country, let alone those in other countries. And yet, we have to find what is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Government having contributed the entire share capital, extensive powers are conferred on it, including the power to give directions as to how the company should function, the power to appoint directors and even the power to determine the wages and salaries payable by the company to its employees. But these powers are derived from the company's memorandum of association and the articles of association and not by reason of the company being the agent of the Central Government. The question whether a corporation is an agent of the State must depend on the facts of each case. Where a statue setting up a corporation so provides such a corporation can easily be identified as the agent of the State..... In the absence of a statutory provision, however a commercial corporation acting on its own behalf even though it is controlled wholly or partially by a Government department, will be ordinarily presumed not to be a servant or agent of the State. The fact that a minister appoints the members or directors of a corporation and he is entitled to call for information, to give directions which are binding on the directors and to supervise over the conduct of the business of the corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the common taw principles which no longer bear any relevance when it is tested on the anvil of Article 14. ..... It is to reiterate that Heavy Engineering case is based on concession. ... ... 29. In the light of the above principles and discussions, we have no hesitation to hold that the appropriate Government is the Central Government from the inception of the Act, ... ... 31. Mr. Zaiwala next relied on the case of Western Coalfields Ltd. v. Special Area Development Authority, Korba and another, and Bharat Aluminium Company Ltd. v. Special Area Development Authority, Korba and others, . The case related to the liability of the Western Coalfields Ltd. and Bharat Aluminium Company Ltd., which are Government Companies, towards payment of property tax. The aforesaid companies disputed their liability to pay property tax on the grounds principally that no tax was liable on its property since the company was owned wholly by the Government of India and that the Municipal Corporation was estopped from levying the property tax in view of Article 285 of the Constitution of India. In the context, the Court observed, as under : Even though the entire share capital of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar that even if the Nepal Airlines Corporation, the defendant in the case before us, had been in fact a corporate body, that would not have prevented the defendants or the Ambassador of the King of Nepal from claiming sovereign immunity on behalf of the King of Nepal provided the defendant can be regarded as a Department of the State of the Government of Nepal. I have no doubt that the materials placed before this Court in the affidavits filed by the Ambassador and on behalf of the defendant amply justify us in holding that the defendant is a Department of the Government of Nepal and as such is entitled to claim immunity from the processes to exercise its jurisdiction in respect of the claim for damages which has been brought by the plaintiffs against the defendant. The aforesaid decision has, thus, up held the claim of the Airline which is a Corporation established by the Government of Nepal and which is engaged in commercial activities. 34. Bearing in mind the ratio of the aforesaid decisions, which have been cited before us, we will now proceed to determine, whether the appellant defendant No. 3 is a foreign State within the meaning of section 86 of the Code of Civil Proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrolled by the Government of Kenya the same would be entitled to claim the immunity under section 86 of the Code. The said immunity would be available to the third defendant even though it is engaged in commercial activities as in India the sovereignty is not lost even though a foreign State Government may be engaged in commercial activities. We are, therefore, unable to concur with the contrary view expressed by the learned Single Judge. However, in view of our earlier finding that the third defendant has submitted to the jurisdiction of the Court by waiving its right under section 86 of the Code, we hold that the third defendant is not now entitled to claim the benefit of section 86 of the Code. Present suit, in our view, is maintainable even though no consent has been obtained by the plaintiff from, the Central Government. 35. The ultimate finding of the trial Court is accordingly confirmed, though on grounds different from the ones taken by the learned Single Judge. Appeal, in the circumstances, is dismissed with costs. 36. At this stage, Mr. Presswala prays for stay of the further proceedings in the suit for a period of six weeks in order to enable his client to approac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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