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2006 DIGILAW 706 (DEL)

ARUN JAIN v. ROYAL NEPAL AIRLINES CORPORATION

2006-04-19

BADAR DURREZ AHMED

body2006
BADAR DURREZ AHMED, J. ( 1 ) THIS is an application filed on behalf of the defendant No. 1 (Royal nepal Airlines Corporation) under Section 86 read with Order I Rule 10 (2) of the Code of Civil Procedure, 1908 (hereinafter referred to as the "cpc" ). The defendant No. 1 has filed this application seeking dismissal of the suit as against it on the submission that the defendant No. 1 (Royal Nepal Airlines corporation) is a foreign state and that in view of the provisions of Section 86 (1) CPC, inasmuch as the plaintiff has not obtained the consent of the Central government certified in writing by a Secretary to that Government, there is a complete bar to the suit insofar as the defendant No. 1 is concerned. It is stated in paragraph 2 of the application that Royal Nepal Airlines Corporation is a corporation owned and belonging to the Government of Nepal with all its aircrafts acquired/purchased by the Government of Nepal. It is further stated that in 1958, the Government of Nepal decided that an Airlines be started and aircrafts were acquired by the Government of Nepal in the name of Royal Nepal airlines Corporation through its Ministry of Transport and Communication. A statute known as the Royal Nepal Airlines Corporation Act, 2014 S. Y. (hereinafter referred to as the 2014 Act ) was promulgated by the Government of nepal and was published in the Nepalese Gazette. It is further stated that only Section 1 of the Act providing that the said Act was to be called "the royal Nepal Airlines Corporation Act, 2014 S. Y" came into force immediately upon the promulgation thereof and that the other provisions did not come into force and the defendant No. 1 (Royal Nepal Airlines Corporation) was continuing to operate under the direct supervision and control of the Government of Nepal through a Government Body and an Administrator. It is further stated in the application that Royal Nepal Airlines Corporation is not a Body Corporate but is an undertaking and an organ of His Majesty s Government of Nepal. It is also stated that the expenses of the Airlines are met from Government Revenues and all receipts and profits form part of Government revenue. It is further stated in the application that Royal Nepal Airlines Corporation is not a Body Corporate but is an undertaking and an organ of His Majesty s Government of Nepal. It is also stated that the expenses of the Airlines are met from Government Revenues and all receipts and profits form part of Government revenue. It is further stated that Nepal has at all material times been and still is recognized by the government of India as a "foreign State" and his Majesty the king of Nepal is recognized as the Head of the State of Nepal. It is further averred that the status of defendant No. 1 (Royal Nepal Airlines Corporation) as being a department of the Government of Nepal, and, therefore, falling within the expression "foreign State", has been upheld and adjudicated upon in favour of the defendant No. 1 by the Calcutta High Court in the case of Royal Nepal airlines Corporation and Another v. Manorama Meher Singh Legha and Others: AIR 1966 Calcutta 319. ( 2 ) ON the strength of these statements and submissions, it is contended by the learned counsel for defendant No. 1 that the defendant No. 1, being a foreign state cannot be sued unless and until the written consent of the Central government, certified in writing by a Secretary to that Government, has been obtained. No such consent having been obtained, it was contended, the suit as against defendant No. 1 was clearly not maintainable. Accordingly, the suit as against the defendant No. 1 is sought to be dismissed and the name of defendant no. 1 is sought to be struck out as a party in terms of the provisions of Order 1 rule 10 (2) CPC. ( 3 ) THE learned counsel for the plaintiff contended that the provisions of section 86 CPC would not be applicable. Therefore, although no consent of the central Government has been taken by the plaintiff for instituting the suit, inter alia, against the defendant No 1, this would not be fatal to the suit insofar as the defendant No. 1 is concerned. He submitted that Royal Nepal airlines Corporation was not a foreign state but a corporate body. Therefore, although no consent of the central Government has been taken by the plaintiff for instituting the suit, inter alia, against the defendant No 1, this would not be fatal to the suit insofar as the defendant No. 1 is concerned. He submitted that Royal Nepal airlines Corporation was not a foreign state but a corporate body. He also submitted that under Section 87a "foreign State" has been defined to mean any state which has been recognised by the Central Government and, in view of this, there is no difficulty with the fact that Nepal falls within the meaning of "foreign State". However, the question is as to whether the defendant No. 1 (Royal Nepal Airlines Corporation) falls within this expression. The learned counsel for the plaintiff submitted that the decision of the Calcutta High Court in the case of the defendant No. 1 itself, which is so strongly relied upon by the learned counsel for the defendant No. 1 as being conclusive on this issue, does not in any way establish that the defendant No. 1 as it exists today, falls within the ambit of the expression "foreign state". ( 4 ) BEFORE examining these submissions, it would be necessary to point out the nature of the present suit as also to indicate what has transpired before this Court. The suit as originally framed was for recovery of damages of Rs 25,00,000/- and for permanent injunction. The permanent injunction that was originally sought was for restraining the defendant No. 2 (Syndicate Bank) from transferring an amount of Rs 2. 5 lakhs to the defendant No. 1 by way of encashment of a bank guarantee extended by defendant No. 2 to defendant No. 1 at the instance of the plaintiff. The bank guarantee had been invoked by the defendant No. 1 by its letter No. ROD/2. 1/2205 dated 15. 2. 2001 and it so happened that before the suit was listed for the first time in this Court, i. e. , on 16. 4. 2001, the bank guarantee already stood encashed and the defendant No. 2 had already paid the money to the defendant No. 1. This necessitated the filing of an application ( I. A. 3871/2002) for amendment of the plaint under Order VI rule 17 CPC. By an order dated 11. 3. 2004 the application for amendment of the plaint was allowed. 2001, the bank guarantee already stood encashed and the defendant No. 2 had already paid the money to the defendant No. 1. This necessitated the filing of an application ( I. A. 3871/2002) for amendment of the plaint under Order VI rule 17 CPC. By an order dated 11. 3. 2004 the application for amendment of the plaint was allowed. The amended plaint filed along with the application was taken on record and time was granted to the defendants to file their amended written statements. By way of the amendment carried out in the plaint, the relief of recovery of money was amended to an amount of Rs 27. 5 lakhs in place of the earlier amount of Rs 25 lakhs inasmuch as a further sum of Rs 2. 5 lakhs had been made over to the defendant No. 1 consequent upon the encashment of the bank guarantee as aforesaid. The relief of injunction from encashment of the bank guarantee was done away with, the same having become infructuous. It is at this stage that the present application, i. e. , I. A. 6192/2004, was moved by the defendant No. 1 praying for the dismissal of the suit insofar as the defendant no. 1 was concerned. The application was filed without filing the written statement to the amended plaint. However, the defendant No. 1 sought leave of this Court to file a detailed written statement in the event the relief prayed in the present application was not allowed in its favour. The present application was filed on 16. 9. 2004 Subsequently, however, i. e. on 30. 9. 2004 the defendant No. 1 did file its written statement by way of abundant caution reiterating its preliminary objection raised in the present application (I. A. No. 6192/2004 ). ( 5 ) THE relationship between the plaintiff and the defendants is that the plaintiff was engaged in business as a tour operator and was the sole proprietor of the concern "holiday Nepal". Sometime in September, 1981 the plaintiff is said to have entered into a Sales Agency Agreement with the defendant No. 1 which was confirmed by the Defendant No. 1 by its letter dated 2. 9. 1981 and this agreement was later on converted into a regular agreement dated 20. 10. 1981. Sometime in September, 1981 the plaintiff is said to have entered into a Sales Agency Agreement with the defendant No. 1 which was confirmed by the Defendant No. 1 by its letter dated 2. 9. 1981 and this agreement was later on converted into a regular agreement dated 20. 10. 1981. In terms of the said Agreement, the plaintiff was required to furnish to the defendant No. 1 a Bank Guarantee in favour of defendant No. 1 from time to time. The parties worked under the Agreement for several years and all accounts between the parties stood settled upto the Financial Year 1998-99. However, in the meanwhile, sometime in 1995 the plaintiff and the defendant No. 1 entered into a fresh Passenger Sales Agent Agreement in terms whereof the plaintiff was required to furnish a Bank Guarantee for the amount of Rs 2. 5 lakhs. Thereafter, on account of hijacking of an Indian Airlines Plane from the kathmandu Airport, the tourist traffic between India and Nepal suffered. As a result, the plaintiff was forced to close down a number of its offices and the plaintiff and Defendant No. 1 entered into yet another Passengers Sales Agent agreement on 15. 12. 1999. In terms of this Agreement the earlier bank guarantee of Rs 2. 5 lakhs was continued. However, according to the plaintiff, subsequently the defendant sought to raise illegitimate claims against the plaintiff and threatened to invoke the bank guarantee. It is alleged in the plaint that the actions on the part of the defendant No. 1 caused a lot of inconvenience to the plaintiff and forced him to leave all his important business dealings and the plaintiff was forced to come back to India by incurring a loss of more than Rs 50 lakhs in order to save his reputation in the tourist Trade and Market. However, the plaintiff in the present suit initially restricted his claim of damages to the extent of Rs 25 lakhs only. This amount was further enhanced to Rs 27. 5 lakhs on the bank guarantee being encashed as aforesaid. ( 6 ) I now come to the core issue and that is, whether the defendant No. 1 (Royal Nepal Airlines Corporation) can be said to fall within the expression "foreign State". The scope and ambit of Section 86 (1) of the CPC is quite well settled. 5 lakhs on the bank guarantee being encashed as aforesaid. ( 6 ) I now come to the core issue and that is, whether the defendant No. 1 (Royal Nepal Airlines Corporation) can be said to fall within the expression "foreign State". The scope and ambit of Section 86 (1) of the CPC is quite well settled. The Supreme Court in the case of Mirza Ali Akbar Kashani v United Arab republic and Another: 1966 (1) SCR 319 was of the view that the effect of the provisions of Section 86 (1) CPC appears to be that it makes statutory provisions covering a field which would otherwise be covered by the doctrine of immunity under International Law. To that extent, the effect of Section 86 (1) is to modify the doctrine of immunity recognised by international law. The supreme Court held that the Section provides that foreign states can be sued within the Municipal Courts of India with the consent of the Central Government and when such consent is granted, as required under Section 86 (1), it would not be open for a foreign state to rely on the doctrine of immunity under international law, because the Municipal Courts in India would be bound by the statutory provisions, such as those contained in the Code of Civil Procedure. The Supreme Court, inter alia, held: "in substance, Section 86 (1) is not nearly procedural; it is in a sense a counter-part of Section 84. Whereas Section 84 confers a right on a foreign state to sue, Section 86 (1) in substance imposes a liability on foreign states to be sued, though, this liability is circumscribed and safeguarded by the limitation prescribed by it. That is the effect of Section 86 (1 ). " following the decision in the case of Mirza Ali Akbar Kashani (supra), the supreme Court in the case of Harbhajan Singh Dhalla v Unoin Of India: (1986) 4 scc 678 , confirmed that Section 86 (1) of the CPC is a statutory provision covering a field which would otherwise be covered by the doctrine of immunity under the international law and "save and except in accordance with the procedure indicated under Section 86 of the Code, a suit against a foreign state would not lie. " This was followed by a decision of the Supreme Court in the case of Veb Deutfracht seereederei rostock (D. S. R. l Lines) A Dept. Of the german Democratic Republic v New Central Jute Mills Co. Ltd and Another: (1994) 1 SCC 282 . In this decision the Supreme Court was of the view that the object of Section 86 CPC was to give effect to the principles of International Law. But, in India, it was only a qualified privilege because a suit can be brought with the consent of the Central Government under certain circumstances. Reiterating the principles laid down in Mirza Ali Akbar Kashani. (supra), the supreme Court, in the case of Veb Deutfracht seereederei rostock (supra), held that the effect of Section 86 CPC is to modify the extent of the doctrine of immunity recognised by the international law and that if a suit is filed in indian Courts with the consent of the Central Government, as required by Section 86, it shall not be open for any foreign State to rely on the doctrine of immunity. It was, inter alia, held by the Supreme Court in this case that:"in view of the provisions aforesaid, before any action is launched or a suit is filed against a foreign State, person concerned has to make a request to the central Government for grant of the necessary consent, as required by Sub- section (1) of Section 86 and the Central Government has to accede to the said request or refuse the same after taking into consideration of the facts and circumstances of the case. In a sense it amounts to a bar on the power of court itself which is entitled to try all suits of a civil nature in view of Section 9 of the Code. But Section 9 itself recognises the limitation of such courts to try any suit the recognisance whereof is either expressly or impliedly barred. As such whenever a relief is sought against a foreign State, the court before which such claim is lodged has to examine whether the person concerned has got the consent of the Central Government in terms of Section 86 of the Code. " ( 7 ) UNDOUBTEDLY, the plaintiff has not got the consent of the Central government. As such whenever a relief is sought against a foreign State, the court before which such claim is lodged has to examine whether the person concerned has got the consent of the Central Government in terms of Section 86 of the Code. " ( 7 ) UNDOUBTEDLY, the plaintiff has not got the consent of the Central government. Therefore, if the defendant No. 1 is found to be a "foreign State", then the present suit against the defendant No. 1 would not be maintainable. The issue that requires determination therefore, is, whether the defendant No. 1 (Royal Nepal Airlines Corporation) can be covered by the expression "foreign state". ( 8 ) THE question as to whether Government Corporations having their own legal entity could be covered within the meaning of the expression "foreign state" had also come up for consideration before the Supreme Court in the case of Veb Deutfracht seereederei rostock (supra ). The Supreme Court referred to the cases of Baccus S. R. L. V Servicio Nacional Del Trigo: (1956) 3 All ER 715, 732 and Krajina v The Tass Agency and Another : (1949) 2 All England Law reporter 274 in the following manner:-"8. It is true that Government Corporations have been incorporated to undertake the activities, which at one time were directly part of the activities of the foreign State. A question may arise whether the immunity provided by Section 86 of the Code can be extended to even such Government Undertakings which have their own legal entity. At one time, in view of their corporate and juirstic personality, such Government Corporations were held not to be part of a State having their own independent existence. But, this aspect was re-examined by the english Court as well as this Court. In the case of Baccus S. R. L. V Servicio nacional Del Trigo,1 it was said: " Are we then to hold that the State of Spain is deprived of sovereign immunity with respect to this activity of importing and exporting grain by reason of the fact that the defendants are a corporate body" In my view that would be plainly wrong. In these days the government of a sovereign state is not as a rule reposed in one personal sovereign: it is necessarily carried out through a complicated organisation which ordinarily consists of many different ministries and departments. In these days the government of a sovereign state is not as a rule reposed in one personal sovereign: it is necessarily carried out through a complicated organisation which ordinarily consists of many different ministries and departments. Whether a particular ministry or department or instrument, call it what you will, is to be a corporate body or an unincorporated body seems to me to be purely a matter of governmental machinery. "again, in Krajina v. The Tass Agency2 it was pointed out:"the history of the legislation in this country as regards the departments of state seems to me to show that it is quite possible that a State may for certain purposes under its own legislation give some department of State the status and the rights of a jurisdical entity without depriving the department of its general immunity from suit, and it seems to me that it would be impossible to say " no doubt, our government would not wish to say- that the Crown had thereby deprived itself of the right to rely on that immunity if an attempt were made to sue it in a foreign country. One must look in every case at the facts to reach a conclusion whether the Crown has intended to give up its immunity generally or only for limited and defined purposes. "it, therefore, appears that a Corporation having a juristic personality of its own may yet fall within the meaning of a "state". However, this has to be necessarily examined in the facts and circumstances of each case. The important question being whether the foreign State which incorporates the corporation does so with the intention of giving up of its immunity insofar as the activities covered by the corporation are concerned. If it can be concluded that there was such an intention then clearly such a corporation would not enjoy the immunity which is available to a foreign state. However, if the opposite conclusion is arrived at, i. e. , by incorporating a separate corporation for carrying out certain activities which are purely within the control and dominion of the state, the State did not intend to give up any of its immunity with regard to the activities of the corporation, then the immunity available to the State would also be available to the corporation. This, of course, would have to be examined on a case to case basis. This, of course, would have to be examined on a case to case basis. Insofar as the case before the Supreme Court in Veb Deutfracht seereederei rostock (supra) was concerned, the Supreme Court held the same to be a department of the Government of the German Democratic republic in the following words:-"10. In the present case, the appellant had produced the Constitution of the german Democratic Republic, Article 12 whereof has been reproduced above, which provides that larger industrial enterprises, bank, insurance companies, nationally-owned farms, means of transport of the railways, ocean shipping and civil aviation, post and telecommunication installations are nationally-owned property, private ownership thereof is inadmissible. In view of the aforesaid article 12 of the Constitution and the certificate granted by the Counsel general of the German Democratic Republic, the appellant shall be deemed to be a department of the Government of German Democratic Republic. "in Deepak Wadhwa v. Aeroflot: 1983 (24) DLT (Delhi) 1, a learned single Judge of this Court found Aeroflot to be the "alter ego" or organ of the Government of ussr. In that case evidence has been led by way of affidavits and a certificate under the seal of the Embassy of the USSR in India had also been filed to the effect that AEROFLOT soviet Airlines was a governmental organisation and all its belongings including aircraft were the property of the ussr. There was no rebuttal to this evidence. The learned single Judge also noted that Article 6 of the Constitution (Fundamental Law) of the USSR provided, inter alia, that air transport was State property, that is, belonged to the people. It is in this context that the learned Single Judge in the case of deepak Wadhwa (supra) came to the conclusion that AEROFLOT was an alter ego or organ of the Government and consequently, the provisions of Section 86 CPC came into play. ( 9 ) IN another decision of a learned single Judge of this Court in the case of Durgeshwari Devi v. International Development Research Centre: 1999 IV AD (Delhi) 926, a question arose as to whether the International Development research Centre (IDRC) fell within the meaning of the expression "foreign state". In that case, it was contended that IDRC was an agency of the State of canada and, therefore, the provisions of Section 86 applicable to a foreign state would come into play. In that case, it was contended that IDRC was an agency of the State of canada and, therefore, the provisions of Section 86 applicable to a foreign state would come into play. It was observed that IDRC was created by an Act passed by the Parliament of Canada. What is material is that Section 18 (1) of the IDRC Act provided that IDRC was not an agent of Her Majesty, and, except as provided in Sub-section (2), the Governors and the officers, agents and employees of the IDRC were not part of the public service. Section 19 of the idrc Act also provided that for the purposes of Income Tax, IDRC to be a registered charity. As regards financial provisions, it was indicated in section 20 of the IDRC Act, that IDRC would establish, under its management, a bank account known as the International Development Research Centre Account and there shall be credited to the Account all such amounts realised by the IDRC under the Act in carrying out research or technical development or from providing any other services in Canada or elsewhere under any contract or agreement. It was further provided that there shall be charged to the Account all expenditures incurred by or for the Centre under the Act in carrying out the research and development activities or providing the services referred to in sub-section (2 ). Section 20 (4) of the Act further provided that the Minister of Finance shall, out of the special account for international development assistance, pay to the Centre, a grant of one million dollars to establish the account. Despite all these, the learned single Judge held that IDRC was not a foreign State and did not enjoy the protection under Section 86 of the CPC. This conclusion was arrived at by the learned Single Judge in the following manner:- "12. Taking into consideration all the provisions of the Act, read alongwith the documents placed on record, it cannot be said that the Centre is an agency of the Government of Canada or that it is a foreign State. In order to appreciate and come to the conclusion as to whether the defendant is a foreign state or an agency of the Government of Canada, the provisions of the Act are to be looked into, which created the institution, namely, the defendant. The communication dated 2. 6. In order to appreciate and come to the conclusion as to whether the defendant is a foreign state or an agency of the Government of Canada, the provisions of the Act are to be looked into, which created the institution, namely, the defendant. The communication dated 2. 6. 1983 only states that the defendant is an entity created by the Parliament of Canada, which is a fact. However, the view contained therein that the defendant is created and funded by the Parliament of Canada for the purpose of initiating, encouraging, supporting and conducting research is not borne out by the records of the case except for the fact that an initial grant was given by the Minister of Finance to establish the Account out of the special account for international development assistance in the account of canada. The Centre is to generate its own funds and amounts are to be realised by the Centre by carrying out research technical development or from providing any other services in Canada or elsewhere under any contract or agreement. 13. In the light of aforesaid provisions of the Act and the documents placed on record, I am of the conscious view that the defendant is not a foreign State and does not enjoy the protection as provided for under Section 86, CPC. The decision in Veb Deautiracht Seereederei Rostock (supra) and relied upon by the defendant in support of her contention is not applicable to the facts and circumstances of the present case. A perusal of the said decision would indicate that it was an admitted position in the said case that the appellant belonged to and was owned by the German Democratic Republic. The contention of the appellant therein was that it is a department and/or agent and/or instrumentality of the Government of German Democratic Republic, which is recognised as a sovereign foreign State. The same was admitted by the carrier and in the light of the aforesaid fact, the Court came to trhe conclusion that the appellant is a foreign State and is protected under the provisions of section 86, CPCV and that without consent of the Central Government no suit could be instituted against the appellant being a sovereign foreign State. The same was admitted by the carrier and in the light of the aforesaid fact, the Court came to trhe conclusion that the appellant is a foreign State and is protected under the provisions of section 86, CPCV and that without consent of the Central Government no suit could be instituted against the appellant being a sovereign foreign State. In the present case, the Act under which the defendant was created, itself specifically provides that the defendant is not an agency of the Government of canada and, therefore, it cannot be treated as a foreign State within the meaning of provisions of Section 86, CPC and, therefore, the preliminary objection raised by the defendant is held to be mis-placed and not tenable and it is held that the suit is maintainable against the defendant even without obtaining permission from the Central Government and that the provisions of section 86, CPC are not applicable to the facts and circumstances of the present case. " ( 10 ) THE question whether Saudi Arabian Airlines Corporation fell within the ambit of the expression "foreign State" as appearing in Section 86 CPC came up for consideration before another learned Single Judge of this Court in the case of Mansoor Mumtaz and Ors v. Saudi Arabian Airlines Corporation: 2001 VII ad (Delhi) 502. In this case, particularly in view of the provisions of the constitution of the Kingdom of Saudi Arabia, the learned Single Judge came to the conclusion that the control over the Saudi Arabian Airlines Corporation was with the State, and merely because it was carrying on an independent work would not take it out of the purview of Section 86 (1 ). The Court, inter alia, held as under: "it will still be a foreign State because of the nature of the bylaws and the control which is almost complete with the State and its functionaries. Consequently before the suit could be filed the consent of the Central government certified in writing by the Secretary to the Government was necessary. " ( 11 ) THIS leaves me to discuss the case of Royal Nepal Airlines Corporation (supra ). In that case, a Division Bench of the Calcutta High Court, through separate opinions of H. K. Bose, CJ and G. K. Mitter, J held the Royal Nepal airlines Corporation to be a "foreign State". " ( 11 ) THIS leaves me to discuss the case of Royal Nepal Airlines Corporation (supra ). In that case, a Division Bench of the Calcutta High Court, through separate opinions of H. K. Bose, CJ and G. K. Mitter, J held the Royal Nepal airlines Corporation to be a "foreign State". However, since this decision is the bedrock of the submissions made by the learned counsel for the defendant no. 1 (Royal Nepal Airlines Corporation), it must be examined at some depth to see what were the circumstances which led the Calcutta High Court to arrive at the conclusion that it did. In the opinion rendered by H. K. Bose, CJ, the following observations/conclusions have been made:-"34. It will thus appear that even if the Nepal Airlines Corporation, the defendant in the case before us, had been in fact a corporate body, that would not have prevented the defendants or the Ambassador of the King of Nepal from claiming sovereign immunity on behalf of the King of Nepal provided the defendant can be regarded as a Department of the State of the Government of nepal. I have no doubt that the materials placed before this Court in the affidavits filed by the Ambassador and on behalf of the defendant amply justify us in holding that the defendant is a Department of the Government of Nepal and as such is entitled to claim immunity from the processes to exercise its jurisdiction in respect of the claim for damages which has been brought by the plaintiffs against the defendant. ""57. In the circumstances, as my view is that this Court has no jurisdiction to entertain and try the suit in question on the ground that the claim for sovereign immunity must be sustained and the defendant Corporation is a department of the sovereign State of Nepal, this suit must be dismissed or must not be proceeded with. . . . . . . . "in the opinion rendered by Mittar J, the following observations/conclusions are of importance:"68. In or about the year 1958 His Majesty s Government of Nepal decided that a nepalese Airline would be started on a commercial basis and for that purpose it purchased a few aircrafts and started running the same under the name and style of Royal Nepal Airline Corporation through its Ministry of Transport and communication. In or about the year 1958 His Majesty s Government of Nepal decided that a nepalese Airline would be started on a commercial basis and for that purpose it purchased a few aircrafts and started running the same under the name and style of Royal Nepal Airline Corporation through its Ministry of Transport and communication. The aircraft which met with the accident was one of those received by way of aid and gift from the United States Government to the government of Nepal and at all material times was the property of His Majesty s government of Nepal. To run and manage the said aircrafts a statute known as the Royal Nepal Airline Corporation Act 2014 S. Y. was promulgated by His Majesty the King of Nepal by publishing the same in the Nepal Gazette. Provision had been made in the said Act for the formation of a corporate body to be known as the Royal Nepal Airline Corporation. The section of the Act namely section 1 providing that the Act was to be called The Royal Airline Corporation Act 2014 came into force immediately upon the promulgation thereof. All the other provisions of the said Act, by the very terms of the Act itself, were to come into force from a date to be specified in a notification by the Government of the Nepal Gazette. As a matter of fact, no such notification was ever published and the Act except Section 1 never became operative. The aircraft which crashed as well as the other aircrafts continued to remain the property of His Majesty s government of Nepal and the Airline continued to operate under the direct supervision and control of the said Government through a governing body and an administrator. Royal Nepal Airline Corporation was merely an undertaking or organ of the said Government. The expenses of the airline were met from out of government Revenues and all receipts and profits similarly formed part of government Revenues. The plaintiffs cause of action if any, was in reality against the Ruler of a foreign State and/or a foreign State. No permission of the Central Govt. of India had ever been obtained by the plaintiffs to institute the suit. The Government of Nepal and/or its Ruler enjoys full and complete immunity and exemption from the processes of civil courts in this country. Consequently, the suit cannot be heard on its merits. No permission of the Central Govt. of India had ever been obtained by the plaintiffs to institute the suit. The Government of Nepal and/or its Ruler enjoys full and complete immunity and exemption from the processes of civil courts in this country. Consequently, the suit cannot be heard on its merits. The petitioner never submitted nor intends to submit to the jurisdiction of this Court. The defendant would be seriously prejudiced if the merits of the suit were gone into before the decision on the question of jurisdiction and maintainability of the suit. " " 78. Counsel for the appellant thus put his case in the first appeal. The royal Nepal Airline Corporation was not a body corporate. It was an undertaking or organ of the Government of Nepal of which the head was His Majesty the King of Nepal. Nepal was monarchical State, all the judicial, legislative and executive functions being vested in the Ruler himself. All the aircrafts of the defendant belonged to His Majesty the King of Nepal and the income and outgoings of the said Airline were respectively credited and debited to the revenues of the Kingdom. The Royal Nepal Airline Corporation Act never came into operation except the first section by which the Act was named. The King of nepal enjoys sovereign immunity accorded to sovereign princes and independent states and their property by international law. As soon as it is claimed that the defendant is an undertaking or organ of a foreign State and as such entitled to immunity under international law the Court must try that issue on evidence, if necessary, and proceed with the hearing of the suit only after it has found that sovereign immunity was not properly claimable. ""113 The principles deducible from all these cases seem to be as follows: (1 ). . . . . . (2 ). . . . . . (3) A suit will not lie against the agent of a foreign State where the act complained of is purported to be done as such agent. "" (4) A suit will not lie against a department of a State. It is doubtful whether immunity can be claimed when the department is a corporation sole with power to hold and acquire property and the right to sue and the liability to be sued. "" (4) A suit will not lie against a department of a State. It is doubtful whether immunity can be claimed when the department is a corporation sole with power to hold and acquire property and the right to sue and the liability to be sued. So far as the English Courts are concerned the mere incorporation of a body will not deprive it of immunity if it is a department of State. An incorporated body which is a juristic personality carrying on business in the country where proceedings are started against it, will be outside the "protective umbrella" of immunity. ""5. . . . . . . . . The effect of incorporation under a foreign law will have to be considered by the Court on the material presented. ""6 If the title to property, the subject matter of the suit, is in dispute the claim to immunity will not be given effect to before the Court is satisfied that the claim is not illusory nor founded on a title manifestly defective. " ( 12 ) AN examination of all these extracts from the decision of the Calcutta high Court in the case of Royal Nepal Airlines Corporation (supra) indicates that it was based to a great extent on the fact that the provisions of the Royal nepal Airlines Corporation Act, 2014 except to the extent of Section 1 thereof never become operative and, therefore, the Royal Nepal Airlines Corporation was not a body corporate but a department of the State. It is absolutely clear that if the defendant No. 1 were to be held to be a department of the State then, on the strength of the decision in the case of Veb Deutfracht seereederei rostock (supra), it would clearly fall within the expression "foreign State" as appearing in Section 86 (1) CPC. But the question here is as to what would be the position if the defendant No. 1 were, in fact, a Corporate Body and not a clear-cut department of the State" The current position with regard to the status of Royal Nepal Airlines Corporation is somewhat different to that before the Calcutta High Court and also to what has been pleaded in paragraph 2 of this application. The defendant No. 1, in the course of present proceedings has filed a document entitled "royal Nepal Airlines Corporation Act (Amendment) 2019 (1963 AD) (hereinafter referred to as the 2019 Act ). The preamble of this Act clearly indicates that it was expedient to amend and consolidate the Royal Nepal airlines Act, 2014 (1958 AD) for convenience of the people in general. Unlike the 2014 Act, the 2019 Act, in view of Section 1 (3) thereof, came into force at once in its entirety. It must be remembered that the 2014 Act, as noted in the decision of the Calcutta High Court and as mentioned in the present application did not come into force in its entirety. What is also material is that by virtue of Section 29 (1) of the 2019 Act, the 2014 Act was repealed. Therefore, the 2014 Act is not in force any longer. It was not in force from the day the 2019 Act came into force sometime in 1963. Therefore, the conclusions arrived at with regard to the nature of Royal Nepal Airlines Corporation, based upon the fact that no part of the 2014 Act other than Section 1 had come into force which in turn implied that the Royal Nepal Airlines Corporation was not a Body corporate and continued as a department of the State, cannot be said to hold good any longer. As a consequence, the question whether the defendant No. 1 fell within the expression "foreign State" has to be examined de-novo and dehors the decision of the Division Bench of the Calcutta High Court. ( 13 ) SOME relevant provisions of the 2019 Act need examination:"3. Establishment of the Corporation:- (1) A Corporation by the name of the Royal Nepal Airlines Corporation shall be established. (2) The Corporation shall be a corporate and autonomous body having perpetual succession. It shall have a seal of its own for the purpose of its entire function. Subject to the provisions of this Act it may acquire, use, hold and transfer movable and immovable property. It may sue and be sued by its name. (3) The head office of the Corporation shall be situated in Kathmandu or at such place prescribed by His Majesty s Government, and the Corporation may establish its branches within or outside of the Kingdom of Nepal. ""13. It may sue and be sued by its name. (3) The head office of the Corporation shall be situated in Kathmandu or at such place prescribed by His Majesty s Government, and the Corporation may establish its branches within or outside of the Kingdom of Nepal. ""13. Functions, Duties and Powers of the Corporation:- (1) Subject to the provisions of this Act and the rules framed under this Act, it shall be the duty of the Corporation to operate the concerned air transport services within or outside the Kingdom of Nepal in a safe, efficient, well managed, economical and proper manner. The Corporation may exercise its powers for developing air transport services so as to ensure maximum gain and make available such services as cheap fares as far as possible. (2) Without prejudice to the generality of the power conferred by sub-section (1), the Corporation may exercise the following powers in particular:- (a) To operate any air transport services or any flight by aircraft for a commercial or other purpose, and to carry out all forms of aerial works. (b) To provide for the instruction and training in matters connected with aircraft or flight by aircraft to persons desirous of being appointed in the corporation, or to any other person. (c) To obtain the corporation and services of any aviation agency of a foreign country, if necessary, with the prior approval of His Majesty s Government to perform any function pertaining to flight by aircraft, which it is entitled to carry on under this Act. (d) To acquire, use, hold, sell or transfer movable or immovable property and to perform any other function pertaining to air transport. (e) To manufacture, repair or produce the aircraft, vehicles or other spare parts, belonging to itself to any other person. (f) To conclude and execute all such contracts as may be helpful in the exercise of its powers and the performance of its duties under this Act. (g) To act as an agent or contractor in matters pertaining to air transport services operated by any other person. (h) To enter into agreement with any person engaged in air transport services for enabling him to operate such services on behalf of or in co-operation with the Corporation. (i) To collect fares and other prescribed charges from passengers transported through air transport services operated by it, with the prior approval of His majesty s Government. (h) To enter into agreement with any person engaged in air transport services for enabling him to operate such services on behalf of or in co-operation with the Corporation. (i) To collect fares and other prescribed charges from passengers transported through air transport services operated by it, with the prior approval of His majesty s Government. (j) To determine freight rates for cargo transported through air transport services operated by it, with the prior approval of His Majesty s Government. (k) To adopt such measures as are necessary for improving the various types of aircraft to be used in the development of feeder services and air transport services and for improving the air transport services operated by the corporation within or outside the Kingdom of Nepal. (l) To undertake any work in the interest of the Corporation or to do necessary works to refrom and to provide services and facilities such as food rest-houses, hotels, godowns and the land and water transport services related with the airways services regulated by the corporation, and; (m) To perform all such functions as are necessary and convenient for the discharge of its duties and the exercise of its powers under this Act. ""15. Monopoly to operate Scheduled Air Transport Services:- (1) No person other than the Corporation or its associated shall be entitled to operate any scheduled air transport services from or to the kingdom of Nepal or from one part of the Kingdom of Nepal to another part from such date as may be prescribed by His Majesty s Government by a notification published in the Nepal gazette. Provided that nothing in this Section shall be deemed to have limited the following rights of any person:- (a) to operate air transport services by a person with the permission of His majesty s Government for such time until the Corporation itself is competent to operate such services from or to the kingdom of Nepal or within the kingdom of nepal, or to operate air transport services by any foreign government pursuant to an agreement signed with His Majesty s Government, or to operate air transport services pursuant to an agreement entered into with His Majesty s government prior to the commencement of this Act until the expiry of the terms of such agreement, (b) to operate aircraft with passengers mainly with the purpose of imparting instructions relating to the functions and duties of air pilots or enabling air controllers to test the aircraft; or (c) to transport passengers and goods for the purpose of providing relief if the event of natural disaster, or (d) to operate aircraft for the sole purpose of joy rides consisting of flights operated from and to the same airport or place without landing at any other airport or place, or for the purpose of aerial survey, fire fighting, crop- dusting, locust control, transport the passengers and goods for the purpose of similar other functions,""16. Fund of the Corporation:- (1) The Corporation shall have a separate fund of its own. All incomes of the corporation shall be deposited in this fund and all expenditures shall be made from the same fund. (2) The Corporation shall deposit its fund with the Nepal Rastra Bank and where a branch of the Nepal Rastra Bank is not established, with a Bank as prescribed by the Board. For the purpose of its business, if the Corporation has to maintain funds in foreign countries as well, it shall deposit its fund with a bank recommended by the Nepal Rastra Bank after obtaining the approval of His majesty s Government. Explanation:- the term Bank also denotes the branch or sub-branch thereof. ""18. Profit and Loss at the end of every fiscal year, the Corporation after providing, on its discretion for reserve fund, depreciation and similar other amounts from the profit earned during that year, shall deposit the balance with His Majesty s government. In case the Corporation incurs any loss, such loss shall be met by his Majesty s Government. ""18. Profit and Loss at the end of every fiscal year, the Corporation after providing, on its discretion for reserve fund, depreciation and similar other amounts from the profit earned during that year, shall deposit the balance with His Majesty s government. In case the Corporation incurs any loss, such loss shall be met by his Majesty s Government. " ( 14 ) SECTION 3 (1) of the 2019 Act clearly stipulates the establishment of a Corporation by the name of Royal Nepal Airlines Corporation. Section 3 (2) of the 2019 Act further stipulates that this Corporation shall be a corporate and autonomous body having perpetual succession. It shall also have a seal of its own for the purpose of its entire function. The Corporation may also acquire, use, hold and transfer movable and immovable property. Most importantly section 3 (2) of the said 2019 Act provides that the Royal Nepal Airlines corporation may sue and be sued for its name. This fact, to my mind, is most significant keeping in view the aforesaid decisions and in particular the decision of the Supreme Court in the case of Veb Deutfracht seereederei restock (supra) which has quoted with approval the case of Krajina (supra) wherein it was pointed out that it was possible for the State to create a juridical entity by legislation without depriving the same of its general immunity from suit. It was, however, pointed out that one must look in every case at the facts to reach a conclusion whether the State intended to give up its immunity generally or only for limited or definite purpose. In the case at hand, I find that the immunity available to the State was given up by specifically legislating that the Royal Nepal Airlines Corporation may sue or be sued by its name. This indicated an express intention on the part of the State to lower its shield of sovereign immunity insofar as the Royal Nepal Airlines Corporation was concerned. As noted in the Supreme Court decision in the case of Chief conservator of Forests, Govt. This indicated an express intention on the part of the State to lower its shield of sovereign immunity insofar as the Royal Nepal Airlines Corporation was concerned. As noted in the Supreme Court decision in the case of Chief conservator of Forests, Govt. of A. P. v. Collector and Others: (2003) 3 SCC 472 (paragraph 12), "a legal entity " a natural person or an artificial person " can sue or be sued in his/its own name in a court of law or a tribunal" and that "it is not merely a procedural formality but is essentially a matter of substance and considerable significance". That is why "there are special provisions in the Constitution and the Code of Civil Procedure as to how the Central government or the Government of a State may sue or be sued. " A parallel can also be drawn from the distinction between subrogation and assignment under insurance law. As noted in the Supreme Court decision in the case of Oberai forwarding Agency v. New India Assurance Co. Ltd. and Another: (2000) 2 SCC 407 , subrogation is the substitution of one person for another. The doctrine of subrogation confers upon the insurer the right to receive the benefit of such rights and remedies as the assured has against third parties in regard to the loss to the extent that the insurer has indemnified the loss and made it good. The insurer is, therefore, entitled to exercise whatever rights the assured possesses to recover to that extent compensation for the loss, but it must do so in the name of the assured. A reference to the standard textbook, Insurance law by Macgillivray and Parkington (7th Edn.), was also made in the said decision to bring out the distinction between subrogation and assignment. It was pointed out that the distinction, inter alia, lies in the insurer exercising rights of subrogation against third parties in the name of the assured. Whereas, an insurer who has taken a legal assignment of the assured s rights under statute has to proceed in his own name. It was pointed out that the distinction, inter alia, lies in the insurer exercising rights of subrogation against third parties in the name of the assured. Whereas, an insurer who has taken a legal assignment of the assured s rights under statute has to proceed in his own name. Therefore, in this context, when the 2019 Act permits the Royal Nepal Airlines Corporation to sue and be sued by its name, it operates more like an assignment but where none of the rights available to the State as a State such as sovereign immunity have been assigned to the Royal Nepal Airlines Corporation because sovereignity or any part of it cannot be so assigned. I am of the view that the Royal Nepal Airlines corporation was constituted as a separate body corporate and the Government of nepal by virtue of the Act of 2019 and in particular Section 3 thereof intended to give up its immunity. Therefore, it is clear that the Royal Nepal Airlines corporation cannot fall within the ambit of the expression "foreign State". Consequently, the provisions of Section 86 CPC would not apply and this application filed by the Defendant No. 1 for striking out its name as a party under Order I Rule 10 (2) CPC is liable to be dismissed. The application is dismissed as such with no order as to costs. .