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

The Respondent has instituted a suit under Order XXXVII of the Code of Civil Procedure, 1908 for the recovery of a sum of Rs. 59.22 lakhs together with interest from the Appellant, based on a contract for carrying out the work of interior decoration at certain offices of the Appellant. In response to the Summons for Judgment, the Appellant filed an affidavit questioning the maintainability of the suit on the ground that permission of the Union Government under Section 86 of the CPC has not been obtained. The learned Single Judge held that the suit is maintainable.2. The Appellant 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 achieve the objects of the company.8. To establish and manage hotels, clubs and restaurants in and outside the State of Qatar.9. To establish and manage duty free shopping.10. To carry out landing, technical and commercial services as well as aircraft catering in principal or on behalf of any third party.11. To establish and manage tourist offices and to carry out media and advertisement works.12. To manage and operate airports.According to the Appellant, the Company is owned and controlled by the State of Qatar and by its ruling family. On this basis it has been asserted that the Appellant "is a foreign state within the meaning of Section 86 of the Code of Civil Procedure" and the suit instituted in the original jurisdiction of this Court is not maintainable in the absence of permission by the Central Government.3. The Respondent had by a communication of its Advocate dated 19 November 2009 to the Legislative Department sought the grant of consent of the Union Government in the Ministry of Law and Justice. The matter was examined and on 24 December 2009 the Union Ministry of External Affairs stated upon consultation with the Legal and Treaties Division that Qatar Airlines does not fall within the purview of Section 86 and thus the question of the grant of permission did not arise. On 13 January 2010 the Advocates for the Respondent once again addressed a communication to the Ministry of External Affairs and submitted that the consent of the Union Government would be required under Section 86 before instituting a suit. On 26 February 2010, the Ministry of External Affairs intimated that the matter was reexamined in the Ministry, which reiterated its earlier view that the grant of permission under Section 86 did not arise.4. Before the learned Single Judge as well as in this Appeal by the Defendant the Additional Solicitor General appearing on behalf of the Union Government has submitted that the institution of the suit did not require the permission of the Union Government under Section 86 (1) since Qatar Airways is not a foreign State within the meaning of(1) of Section 86.5. The learned Single Judge by the judgment impugned in these proceedings has held that the suit instituted against the Appellant is maintainable and that permission under Section 86 of the CPC was not required. Aggrieved, the original Defendant is in Appeal.

Court's reasoning:
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.