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Synopsis

A division bench of Justices KR Shriram and Rajesh Patil of the Bombay High Court recently dismissed an appeal with costs of Rs 10 lakhs filed by the Islamic Republic of Iran through Iranian Islamic Republic Railways, Tehran, Iran.

The bench was hearing an appeal filed against the ex parte impugned judgment dated 16.01.2008 passed by a single judge bench comprising Justice DY Chandrachud (current CJI).

The applicant, Islamic Republic of Iran, floated a global tender for the purchase of railway wagons. K.T.Steel Industries LLP submitted a bid and the applicant entered into a purchase contract with State Trading Corporation of India Pvt. Ltd. on 16.03.1970 for the purchase of 492 railway wagons at U.S.$ 5,584,200.

State Trading Corporation of India Pvt. Ltd assigned the benefit of the contract dated 21.11.1970 to K.T. Steel Industries by a contract executed in Mumbai and it was decided that all payments were to be made through the bank of K.T. Steel.

In the year 1972, because of the increase in oil prices, the contract was amended on 18.08.1976 and the applicant agreed to pay K.T.Steel Industries freight costs based on rates certified by officially recognised bodies of shipping companies, such as West Asia (Gulf Conference) or South Shipping Lines (Iran Lines).

K.T.Steel Industries LLP claimed that the applicant failed to pay the freight charges as agreed upon for 306 wagons shipped in 1973 and 94 wagons shipped in 1977 and thus filed a suit on 06.09.1996.

The Consulate General of IRI replied to the lawyers of K.T.Steel Industries LLP in Mumbai on September 19, 2016, stating that the Consulate is unaware of the proceedings. Also, this is not a commercial entity rather than it has sovereign immunity, it informed. 

On 06.12.2022, Adv Kamat appearing for the Railways of the Islamic Republic of Iran (RAI) filed an appeal against the ex parte order after 12 years and 10 days and claimed that the suit had been wrongfully filed against the Islamic Republic of Iran (IRI) instead of RAI.

It was also claimed that RAI could not have filed the current Appeal and Application prior to July 2019, because RAI received knowledge about the proceedings in July 2019 when the Ministry of Foreign Affairs of Iran forwarded the files and proceedings in the matter to RAI.

K.T. Steel Industries LLP submitted that the applicant was clearly abusing the due process of law by approaching the court after a delay of 12 years. It was also submitted that even after giving a Notice of Motion, the applicant never appeared and therefore the respondent filed an execution application.

Court heard both parties and stated that there was no acceptable explanation for the delay of more than 3 years in the production of the documents.

“The Applicant to distinguish IRIR or RAI from itself is nothing but an eye wash”, the court noted.

Further, the court stated that no explanation was provided for the delay in producing documentary evidence or the separation of legal entities between the Iranian Government and Iranian Railway, and it was the responsibility of the Iranian Government, against whom the cause of action arose and a decree was issued, to inform K.T.Steels, the purported predecessor in interest or successor in interest, of the alleged predecessor in interest or successor in interest.

Furthermore, the court observed that it was the applicant’s responsibility to inform the court about the exclusion clause and the absence of exclusive jurisdiction cannot be said to be a suppression of material facts.

Observing thus, court dismissed the plea filed by IRI and directed them to pay Rs. 10 lakhs within 4 weeks.

Case Title: Islamic Republic of Iran v. KT Steel Industries LLP & Anr