Case: Mirza Ali Akbar Kashani Vs. United Arab Republic And Anr

1. This appeal arises out of a suit filed by the appellant, Mirza Ali Akbar Kashani, against the two respondents, the United Arab Republic, and the Ministry of Economy, Supplies, Importation Department of the Republic of Egypt at Cairo, on the Original Side of the Calcutta High Court. By his plaint, the appellant claimed to recover from the respondents damages assessed at Rs. 6,07,346 for breach of contract. According to the appellant, the contract in question was made between the parties on March 27, 1958. Respondent No. 2 which was a party to the contract had agreed to buy tea from the appellant upon certain terms and conditions: one of these was that respondent No. 2 would not place any further orders in India for purchase of tea with anyone else during the tenure of the contract and that it would, in every case, give the appellant the benefit of the fist refusal for respondent No. 2s additional requirements. The appellant alleged that during the tenure of the contract, the respondents had wrongfully placed an order for the supply of tea with a third party without giving the appellant a chance to comply with the said requirement. That is how the respondents had committed a breach of a material term of the contract.2. Formerly, the Republic of Egypt and the Republic of Syria were two independent sovereign States. They, however, merged and formed a new Sovereign State on February 22, 1958. This new sovereign State is know as the United Arab Republic and is referred as respondent No 1 in the present appeal. This new State has been recognised by the Government of India. Respondent No 2 has been working as a department of respondent No. 1 and is a part and parcel thereof. The present suit was instituted on August 10, 1959. It is common ground that the appellant did not obtain the consent of the Central Government to the institution of the suit under S. 86 of theCode of Civil Procedure. The appellant, however, applied for leave under Cl. 12 of the Letters Patent in view of the fact that a part of the cause of action had arisen within the jurisdiction of the Calcutta High Court. This leave was granted to the appellant by the learned trial Judge.3. On December 3, 1959, the respondents entered appearance in the suit: and on December 17, 1959, they applied for an order that the leave granted under Cl. 12 of the Letters Patent should be revoked, the plaint should be rejected and further proceedings in the suit should be stayed. According to the respondent, the trial Court had no jurisdiction to entertain the suit inasmuch as the President of the United Arab Republic was its Ruler and the suit was, in reality, and in substance, a suit against him and as such, it was barred under S. 86 of the Code. It was further averred on their behalf that no part of the alleged cause of action had arisen within the jurisdiction of the Court; and so, leave could not be granted under Cl. 12. At the hearing of this petition, the respondents were allowed to urge an additional ground in support of their plea that the leave should be revoked; they urged that respondent No 1 was a foreign sovereign State and as such, it enjoyed absolute immunity from being sued in the trial Court under the Rules of International Law as adopted and applied by the municipal law of India.4. These pleas were controverted by the appellant. It was urged that S. 86 of the Code was not a bar to the present suit, as the said section created a bar only against a Ruler of a foreign State and the present suit clearly did not fall in that category. According to the appellant, the immunity from being sued without the sanction of the Central Government to which S. 86 of the Code referred could not be invoked by a foreign State such as respondent No. 1. The appellant also urged that in view of the fact that the transaction which has given rise to the present suit has nothing to do with the governmental functions of respondent No. 1, no immunity could be claimed by the respondents under the doctrine of International Law. The appellant further contended that by appearing in the present proceedings and by filing pleas thereafter, the respondents had submitted to the jurisdiction of the Court and had waived their objection to its jurisdiction.5. The learned trial Judge held that S. 86 did not bar the present suit. He accepted the contention of the appellant that bar could be invoked only against the Ruler of a foreign State and not against respondent No. 1 which was an independent sovereign State. On the question of the plea raised by the respondents under Inter-national Law, the trial Judge held that having regard to the nature of the transaction which has given rise to the present suit the plea of immunity raised by the respondents cannot be sustained. He also found against the respondents on the question of waiver. In the result, the application made by the respondents for revoking leave was dismissed by the trial Judge.6. The respondents then took the matter before the Court of Appeal of the Calcutta High Court under the Letters Patent. Both the learned Judges who constituted the Court of Appeal have upheld the finding of the trial Judge that S. 86 of the Code does not create a bar against the present suit. They have, however, reversed the trial Judges conclusions on the question of the immunity claimed by the respondents under Inter-national Law as well as on the question of waiver. They have held that it was not shown that the application made by the respondents challenging the jurisdiction of the trial Judge to entertain the suit could be reasonably construed as submission to the jurisdiction of the Court by them; and they have come to the conclusion that the doctrine of International Law which recognises the absolute immunity of sovereign independent States from being used in foreign Courts created a bar against the present suit. In the result, the appeal preferred by the respondents has been allowed, the order passed by the trial Judge has been set aside, and the plaint filed by the appellant has been rejected under prayer (b) of the Masters Summons. The appellant has applied for and obtained a certificate from the Court of Appeal and it is with the said certificate that he has come to this Court in appeal.

Court's reasoning:
18. Then in regard to the scope of the suit which may be filed by a foreign State under S. 84, the proviso makes it clear that the suit which can be filed by a foreign State must be to enforce a private right vested in the Ruler of such State or in any officer of such State in his public capacity. It will be recalled that S. 431 (b) of the Code of 1882 had provided that the object of the suit which could be filed under S. 431 should be to enforce the private rights of the head or of the subjects of the foreign State. It appears that this clause gave rise to some doubt as to whether a suit could be brought by a foreign State in respect of the private rights of the subjects of that State; and in order to remove the said doubt, the Code of 1908 inserted the second proviso to S. 84 (1) which took the place of S. 431 of the Code of 1882.This proviso made it clear that the object of litigation by a foreign State cannot be to enforce the right vesting in a subject as such as a private subject: it must be the enforcement of a private right vested in the head of a State or in any officer of such State in his public capacity. In other words, the suit which can be filed under S. 84 and which could have been filed under S. 431 of the Code of 1882, must relate to a private right vested in the head of the State or of the subjects meaning some public officers of the said State. The private right properly so-called of an individual as distinguished from the private right of the State, was never intended to be the subject-matter of a suit by a foreign State under theCode of Civil Procedure at any stage.Besides, on principle, it is not easy to understand why it should be assumed that theCode of Civil Procedure always made a distinction between Rulers of foreign States governed by monarchical form of Government and those which were governed by Republican form of Government. Both forms of Government have been in existence for many years past, and the Legislature which framed the relevant provisions of the Code was aware that there are several States in which monarchical form of Government does not prevail. Could it have been the intention of the framers of theCode of Civil Procedure that monarchical States should be liable to be sued under S. 86 (1), subject to the consent of the Central Government, in the municipal Courts of India, whereas foreign States not so governed should fall outside S. 86 (1) and thus be able to claim the immunity under International Law? In our opinion, no valid ground has been suggested why this question should be answered in the affirmative.The effect of the provisions of Section 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 and liabilities to sue and be sued, so can it provide for the rights and liabilities of foreign States to sue and be sued in its municipal Courts. That being so, it would be legitimate to hold that the effect of S. 86 (1) is to modify to a certain extent the doctrine of immunity recognised by International Law. This section provides that foreign States can be sued within the municipal Courts of India with the consent of the Central Government and when such consent is granted as required by S. 86 (1), it would not be open to a foreign State to rely on the doctrine of immunity under International Law, because the municipal Courts in India would be bound by the statutory provisions, such as those contained in theCode of Civil Procedure. In substance, S. 86 (1) is not merely procedural it is in a sense a counter-part of S. 84. Whereas S. 84 confers a right on a foreign State to sue, S. 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).(1).32. In view of our conclusion that Section 86 (1) applies to the present suit, it follows that in the absence of the consent of the Central Government as prescribed by it, the suit cannot be entertained. On that view of the matter, it is not necessary to deal with the other question as to whether the respondents were justified in claiming absolute immunity under International Law. It is common ground that if there is a specific statutory provision such as is contained in S. 86 (1) which allows a suit to be filed against a foreign State subject to certain conditions, it is the said statutory provision that will govern the decision of the question as to whether the suit has been properly filed or not. In dealing with such a question, it is unnecessary to travel beyond the provisions of the statute, because the statute determines the competence of the suit.33. The result is, the appeal fails and is dismissed. In view of the fact that we are affirming the decision of the Court of Appeal on a ground which did not succeed before that Court, we direct that parties should bear their own costs