On 17 January 2020, the Republic of India made a remarkable move with the issuance of a gazette notification which proclaimed the inclusion of the United Arab Emirates (UAE) as a “reciprocating territory” for the enforcement of judgments (Reciprocating Territory Notification). This alert expands on the features of this new development and the potential benefit for individuals, companies, including financial institutions, in the UAE that have default debtors located in India or with assets in India.
Prior to the enactment of the Reciprocating Territory Notification, a treaty relating to juridical and judicial cooperation in civil and commercial matters for the service of summons, judicial documents, commissions, execution of judgments and arbitral awards was signed between the UAE and India on 25 October 1999 (the Treaty). Shortly after the Treaty was signed, the laws of the UAE recognised India as a reciprocating territory and it became feasible to directly enforce a judgment issued by an Indian court in the UAE courts including mainland Dubai courts, courts of Dubai International Financial Centre (DIFC) and Abu Dhabi Global Markets (ADGM).
However, no amendments were made to its domestic laws by India to implement the Treaty therefore, a judgment obtained from a UAE court relating to a debtor located in India required a creditor to commence fresh proceedings in India, including the presentation of fresh evidence and hearings with the relevant Indian court. This made the process of debt recovery particularly expensive due to the dual court fees and associated legal expenses in each of the UAE and India, time consuming and tedious; an approach that was not favoured by many creditors.
Hereon, although a new court case is still required to be filed with the competent court in India, a judgment issued by a UAE court holds more value than being merely persuasive in nature. This means that the UAE judgment will be treated in a similar manner as a trial conducted in India in accordance with Indian laws, and it will not undergo any further scrutiny from the lower level courts in India. In this regard, following the registration of a new case, the primary step required to be taken by a creditor is to obtain an execution order from the relevant Indian court.
Recovery of the debt against the debtor in India shall mean that the creditor has access to any and all assets owned by the debtor throughout India, including but not limited to tangible and intangible assets such as land, property and shares. Further, in the event that the debtor is bankrupt or claims insolvency in India, an insolvency case against the debtor’s assets under the relevant insolvency laws in India may open additional doors for recovery of the debt.
A key point to note is that the period of enforcement of a UAE judgment in India is time barred at twelve years from the date of issuance of the judgment. Hence, judgments issued since the year 2009 till date are still enforceable in India, subject to the satisfaction of other regulatory requirements imposed by the Treaty and the courts of India.
This is a historic development aimed at strengthening the relationship between the two jurisdictions, with India no longer being a safe harbour for Indian expats who have left the UAE without clearing their debts or making arrangements for payment of their debts.
We, at Anjarwalla Collins & Haidermota have a dedicated India desk, aimed at easing the process of doing business and recovering debt in India, particularly for non-resident Indians, foreigners and companies based in the UAE. We will keep you updated on further developments and clarifications in this area of law.
The legal alert contained above is for informational purposes only and not for the purposes of providing any form of legal advice. You are requested to contact your legal counsel to obtain advice in respect of any particular issue or problem. Use of and access to this legal alert does not create any attorney-client relationship between Anjarwalla Collins & Haidermota, Legal Consultants and the user or browser.