With the increasing frequency of US companies doing business with their Indian counterparts, the issues in resolving legal disputes has become more pronounce. The United States is often the preferred jurisdiction for US investors for reasons of geographic proximity to the courts, comfort with the legal process and laws and court sophistication. However, if that US judgment needs to be enforced in India, the litigant faces a jurisdiction that does not expedite treatment of the judgment since the US is a non-reciprocating territory. The litigant must file a new suit to enforce the judgment in India within three years, which can be complex and time-consuming.
Indian law views the foreign judgment as a distinct cause of action, separate from the cause of action that resulted in the judgment. When initiating suit in India, the judgment holder must decide whether to pursue the original cause of action or the US judgment, or both. This creates an interesting conundrum because assuming the original cause of action arises in India, it gives the plaintiff a second opportunity in that a defeat of one cause of action will leave the other cause of action open for pursuit. But, if the original cause of action does not arise in India, then the Indian court would lack jurisdiction over it and thus if the US judgment is held unenforceable, then the plaintiff will be left with no recourse.
When considering the enforcement of the US judgment, an Indian court will consider:
Whether the Indian defendant has submitted to the personal jurisdiction of the US court?
Whether the judgment was contested or was the result of a default, which is seldom enforced in India?
Whether the Indian party was given proper notice?
Whether the judgment was procured by fraud?
Whether the judgment correctly applied all relevant provisions of Indian and international law?
Whether all claims sustained by the judgment were in conformity with Indian law?
During this review process, the Indian court will also consider whether the US judgment violates the public policy of India. Notably, this public policy requirement often presents the greatest obstacle to enforcement. Penalty clauses, such as treble damages or punitive damages in fraud and RICO cases, are considered contrary to public policy and often prevent the enforcement of the judgment.
Thus, any litigation strategy that involves Indian parties must confront the complexities of Indian law, especially where collection and recovery could take place in India. US parties must be cognizant of the risks associated with enforcing US judgments in India.