Case: Qatar Airways Vs. Shapoorji Pallonji &amp; Company

of government." These observations tend to show that a trading activity carried on by the corporation is not a trading activity carried on by the State departmentally, nor is it a trading activity carried on by a State through its agents appointed in that behalf. (emphasis supplied).16. The same principle was reiterated in a subsequent judgment of the Supreme Court in Western Coalfields Ltd. vs. Special Area Development Authority, Korba & Ors. (AIR 1982 SC 697 )thus:The companies, which are incorporated under the Companies Act, have a corporate personality of their own, distinct from that of the Government of India. The lands and buildings are vested in and owned by the companies: the Government of India only owns the share capital. In Rustom Cavasjee Cooper v. Union of India : [1970]3SCR530, 555 : (AIR 1970 SC 56 at p. 584) (The Banks Nationalisation case) it was held:A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the Company is not the property of the shareholders. A shareholder has merely an interest in the Company arising under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the profit.17. The judgments of the Supreme Court in Mirza Ali Akbar as well as in New Central Jute Mills Co. Ltd., clearly involved a situation where it was either a foreign State or a department of a foreign State that was being sued. In Mirza Ali Akbar the action was brought against the United Arab Republic and a department of Government of Egypt at Cairo on the Original Side of the Calcutta High Court . Similarly, the action in New Central Jute Mills Co. Ltd., in which proceedings eventually led upto the Supreme Court, was brought against an entity 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.18. The rationale for the emerging principle of law was recognised in the judgment of the Court of Appeal in the United Kingdom in Trendtex Trading Corporation Ltd. v. Central Bank of Nigeria (1997) 1 All ER 881)in the following dictum:It is perhaps right to consider first whether the narrower principle is in better conformity with contemporary international relationships than the doctrine of absolute immunity. It seems undeniable that it is. So long as sovereign institutions confined themselves to what may in general terms be described as the basic functions of government a total personal or individual immunity from suit was unobjectionable since the area in which it operated had its own inherent limits. The comity of nations was aided by such a doctrine confined as it was, broadly speaking, to acts which could be properly described as an exercise of sovereign power. The radical changes in political and economic and sociological concepts since the first world war have falsified the very foundations of the old doctrine of sovereign immunity. Governments everywhere engage in activities which although incidental in one way or another to the business of government are in themselves essentially commercial in their nature. To apply a universal doctrine of sovereign immunity to such activities is more likely to disserve than to conserve the comity of nations on the preservation of which the doctrine is founded. It is no longer necessary or desirable that what are truly matters of trading rather than of sovereignty should be hedged about with special exonerations and fenced off from the processes of the law by the attribution of a perverse and inappropriate notion of sovereign dignity.These principles have now been authoritatively recognised as being part of Indian jurisprudence in the Ethiopian Airlines decision of the Supreme Court. The judgment in Ethiopian Airlines has construed the observation in the judgment of the Division Bench of this Court in Kenya Airways as to the entitlement of Kenya Airways to immunity under Section 86 as a prima facie finding since in any event the Division Bench had come to the conclusion that the immunity had been waived by conduct.19. In the present case, without expressing any view on merits of the rival entitlements in the summary suit, we need only observe that 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.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.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]17. The judgments of the Supreme Court in Mirza Ali Akbar as well as in New Central Jute Mills Co. Ltd., clearly involved a situation where it was either a foreign State or a department of a foreign State that was being sued. In Mirza Ali Akbar the action was brought against the United Arab Republic and a department of Government of Egypt at Cairo on the Original Side of the Calcutta High Court . Similarly, the action in New Central Jute Mills Co. Ltd., in which proceedings eventually led upto the Supreme Court, was brought against an entity 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.18. The rationale for the emerging principle of law was recognised in the judgment of the Court of Appeal in the United Kingdom in Trendtex Trading Corporation Ltd. v. Central Bank of Nigeria (1997) 1 All ER 881)in the following dictum:It is perhaps right to consider first whether the narrower principle is in better conformity with contemporary international relationships than the doctrine of absolute immunity. It seems undeniable that it is. So long as sovereign institutions confined themselves to what may in general terms be described as the basic functions of government a total personal or individual immunity from suit was unobjectionable since the area in which it operated had its own inherent limits. The comity of nations was aided by such a doctrine confined as it was, broadly speaking, to acts which could be properly described as an exercise of sovereign power. The radical changes in political and economic and sociological concepts since the first world war have falsified the very foundations of the old doctrine of sovereign immunity. Governments everywhere engage in activities which although incidental in one way or another to the business of government are in themselves essentially commercial in their nature. To apply a universal doctrine of sovereign immunity to such activities is more likely to disserve than to conserve the comity of nations on the preservation of which the doctrine is founded. It is no longer necessary or desirable that what are truly matters of trading rather than of sovereignty should be hedged about with special exonerations and fenced off from the processes of the law by the attribution of a perverse and inappropriate notion of sovereign dignity.These principles have now been authoritatively recognised as being part of Indian jurisprudence in the Ethiopian Airlines decision of the Supreme Court. The judgment in Ethiopian Airlines has construed the observation in the judgment of the Division Bench of this Court in Kenya Airways as to the entitlement of Kenya Airways to immunity under Section 86 as a prima facie finding since in any event the Division Bench had come to the conclusion that the immunity had been waived by conduct.19. In the present case, without expressing any view on merits of the rival entitlements in the summary suit, we need only observe that 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(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.