Case Note & Summary
The dispute arose from an agreement dated 2 October 1946 whereby the first appellant, owner of Sedous Hotel in Lahore, agreed to sell the hotel to the first respondent for Rs. 52,75,000, and the respondent paid Rs. 5,00,000 as earnest money with completion fixed for 20 January 1947. On alleged breach, the respondent filed Civil Suit No. 514/61 of 1946 in the Senior Sub-Judge, Lahore, for recovery of earnest money with interest. The trial court decreed Rs. 5,08,333-5-4 with future interest and costs in favour of the first plaintiff respondent. The appellant appealed to the Lahore High Court; stay of execution was granted on condition of depositing Rs. 3,00,000 on 16 July 1949 and furnishing security for the balance. The decree holder was not allowed to withdraw the deposit due to the appellant's objection. The Lahore High Court dismissed the suit in toto on 24 November 1949, but the Federal Court of Pakistan restored the trial court decree on 21 December 1953. During this period, evacuee legislation was enacted in Pakistan; the Custodian attempted to claim the deposit as appellant was an evacuee. Execution of the Pakistani decree in India was attempted before the Punjab High Court but dismissed as without jurisdiction; on appeal, the Supreme Court held that the remedy was a suit under Sections 9 and 13 CPC. The respondent then filed a suit for recovery of the decree amount based on the foreign judgment; the trial court and the Delhi High Court (Himachal Bench) decided in his favour. On appeal to the Supreme Court, the appellant raised three contentions: first, that the decree had vested in the Custodian under the Pakistan evacuee law; second, that the suit was barred by limitation under Article 117 of the Limitation Act, 1908; and third, that the Rs. 3,00,000 deposit should be adjusted towards the decree, leaving liability only for the balance. The Supreme Court rejected the first contention, holding that the decree was not shown to be evacuee property under Section 3 of the Pakistan Administration of Evacuee Property Act, 1957, and the Custodian had never claimed rights qua the decree-holder. On limitation, the Court held that Section 14 of the Limitation Act, 1908 saved the suit because the earlier execution proceedings were prosecuted in good faith after consulting leading lawyers and were dismissed solely for initial lack of jurisdiction. On the third contention, the Court applied equitable principles, observing that in India equity is enforced as law and that the loss arose largely from the Pakistan government's refusal to comply with its own court orders. Since both parties had at one stage agreed that the deposit should go in satisfaction of the decree, the Court held that the Rs. 3,00,000 deposit should be treated as a pro tanto discharge of the decree from the date the appellant agreed to such adjustment. The decree amount inclusive of costs was to be calculated, Rs. 3,00,000 deducted, and the respondent was entitled only to the balance with 5% interest from that date as stipulated in the decree. The principal appeal was allowed in part; the other appeal was not pressed and extinguished.
Headnote
A) Civil Procedure - Foreign Judgment - Enforceability and Conclusiveness - Code of Civil Procedure, 1908, Section 13 - A foreign judgment is enforceable by a suit upon the judgment and is conclusive as to matters directly adjudicated between same parties unless any exception under Section 13 applies - The Pakistan Federal Court decree in favour of respondent was not hit by any of the nullifying clauses, hence conclusive (Paras not mentioned). B) Evacuee Property - Vesting of Decree in Custodian - Pakistan Administration of Evacuee Property Act, 1957, Section 3 - Decree not treated as evacuee property under Section 3 and Custodian never claimed rights qua decree-holder - Decree did not vest in Custodian and respondent entitled to sue on foreign judgment (Paras not mentioned). C) Limitation - Exclusion of Time in Prior Proceedings - Limitation Act, 1908, Section 14 and Article 117 - Earlier execution proceedings in India prosecuted bona fide after legal advice and dismissed solely for want of initial jurisdiction - Section 14 applies to execution proceedings and excludes time, saving suit from bar of limitation (Paras not mentioned). D) Equity - Application of Equity in India - Pro Tanto Discharge of Decree - Code of Civil Procedure, 1908, Section 13 read with equitable principles - Indian courts apply equity as law with judicial conscience; where foreign government refused to comply with its own courts' directions regarding deposit and both parties once agreed deposit should satisfy decree, equity required treating Rs. 3 lakh deposit as pro tanto discharge from date of agreement - Held appellant liable only for balance with 5% interest (Paras not mentioned).
Issue of Consideration
Whether the Pakistani Federal Court decree was enforceable in India under Section 13 CPC; whether the suit was barred by limitation under Article 117 of the Limitation Act, 1908 despite Section 14; whether the decree vested in the Custodian under Pakistan evacuee law; whether the Rs. 3 lakh court deposit should be adjusted towards the decree
Final Decision
Appeal allowed in part. The foreign judgment was held conclusive under Section 13 CPC. The decree did not vest in the Custodian. The suit was not barred by limitation due to Section 14 of the Limitation Act, 1908. The Rs. 3,00,000 deposit was treated as pro tanto discharge of the decree from the date the appellant agreed to adjustment. The decree amount inclusive of costs was to be calculated, Rs. 3,00,000 deducted, and the respondent entitled only to the balance with 5% interest from that date. Civil Appeal No. 2248 of 1968 was extinguished/not pressed.
Law Points
- Foreign judgment enforceable by suit and conclusive under Section 13 CPC
- no vesting of decree in Custodian absent Section 3 notification
- Section 14 Limitation Act 1908 saves limitation for bona fide prior proceedings dismissed for want of jurisdiction
- equity applied as law in India
- court deposit treated as pro tanto discharge when foreign government refuses to comply with court orders
