ASHOK AGARWAL, J.
( 1 ) THE questions which arise for our consideration, in the present Appeal, are: (I) Whether the appellant - original defendant No. 3 Kenya Airways can be held to be a Foreign State within the meaning of section 86 of the Code of Civil Procedure, 1908 (II) If yes, whether the first respondent original plaintiff was required to obtain a consent of the Central Government before filing the present suit as required by the aforesaid section (III) Whether the third defendant has waived its right under section 86 of the Code (IV) Whether the communication dated 2nd June, 1995 addressed by the Ministry of External Affairs, Government of India, to the plaintiff entitles the plaintiff to file the present suit on the hypothesis that no consent under section 86 is required to be obtained prior to filing of the present suit
( 2 ) APPELLANT, Kenya Airways, is defendant No. 3 in the suit. Respondent is original plaintiff No. 1, who along with original plaintiff No. 2, since deceased, is owner and as such landlord in respect of a flat on the South-West side on second floor of Dunkeld Building, 8, Harkness Road, Bombay 400 006 alongwith a garage located on the ground floor of the said building. Under an agreement of leave and license dated 11th of June, 1974 plaintiff Nos. 1 and 2 permitted original defendant one Mr. Ben Mbrani, the Manager in India of East African Airways posted at Bombay and having a temporary assignment in India, to occupy the said flat on leave and licence basis for a period of six months commencing from 1st June, 1974. Under Clause 4 of the agreement, the licence was given to defendant No. 1 for use of the flat and the garage for his personal use only and for no other purpose. The flat was to be used for his personal residence only. Clause 7 of the agreement provided that in case the licensee commits breach of any of the terms and conditions of the licence the licensor shall become entitled to revoke the licence notwithstanding the fact that the period of licence had not expired and upon revocation of the licence the licensee and his family were to remove themselves from the flat and garage. On the date of the execution of the leave and licence agreement, defendant No. 1 executed a declaration whereby he confirmed that the owners had given the said licence to him on his express representation that he will hand over to them possession of the said flat on or before the expiry of the said licence without creating any difficulty or obstruction or without claiming any right or interest of any kind whatsoever in the said flat and in the said garage. He further confirmed that but for the aforesaid representation the owners would not have given the said leave and licence to him.
( 3 ) AFTER passage of time original defendant No. 2 M. Yusuf Butt - came to be inducted in the aforesaid premises. By a communication issued by defendant No. 2 on 29th July, 1978 to the attorneys of the plaintiffs, defendant No. 2 claimed that he was occupying the premises having succeeded defendant No. 1 in his capacity of being the Manager of the third defendant Kenya Airways. Defendant No. 2 accordingly claimed to be in possession in his independent right being the Manager of Kenya Airways in Bombay. Present suit for possession is filed on the 30th of August, 1978 claiming possession of the aforesaid premises from the defendants.
( 4 ) IN the suit, plaintiff took out Notice of Motion No. 1012 of 1978 for interim reliefs. In the motion, defendant No. 2 filed an affidavit in reply. In para 1 of the reply defendant No. 2 asserted that he was at present the Manager, in India, of the third defendant- Kenya Airways. Averments contained in paras 2 (a) to 2 (c) and para 3 (a) of the affidavit, which are relevant for the enquiry at hand, read as under : (A) The defendant No. 1 at the relevant time was the Manager - India of East African Airways. On East African Airways discontinuing its operations in India, Kenya Airways, commenced operations in India with effect from 1st March, 1977. The 1st defendant was the Manager-India of East African Airways till 1st March, 1977 and thereafter the Manager-India of Kenya Airways, the 3rd defendant herein till 1st May, 1978. I became the Manager India of Kenya Airways, and succeeded the 1st defendant as Manager-India of Kenya Airways as from 1st May, 1978. (B) The 3rd defendant Company is an international Airways Company. Its Management is controlled from Kenya, Africa. Its affairs are managed in India by persons appointed as Manager by the Head Office in Nairobi. An international airways company requires premises for its offices and its staff and also for the residence of its Manager in the different countries in which it operates. Such Company has its Managers changing from time to time in every country where its offices are situated. The Flat required inter alia by such company for its Manager is always occupied by the Manager for the time being. This is always known and conveyed to the persons from whom the Flat is taken for the purpose of occupation of the Manager of such Airways-Company. The plaintiffs were never known to the defendant No. 1 and Eastern African Airways at any time before the suit flat was taken by East African Airways from the plaintiffs in or about June, 1974. East African Airways were in search of flat for the purpose of residence for their Manager-India in or about June, 1974. The plaintiffs and East African Airways were complete strangers to one another. The plaintiffs were desirous of letting out the suit flat at the best available rent to any respectable persons. The deal in respect of the suit flat was entered into between East African Airways and the plaintiffs in or about June, 1974 through Estate Brokers, Bhagwandas T. M. the Agents of the plaintiffs. While taking the suit flat from the plaintiffs, the said Bhagwandas T. M. , Brokers, who were acting as agents for and on behalf of the plaintiffs, knew very well that the suit flat was required by East African Airways for themselves, for accommodating for the time being their Manager-India. In fact at the time of taking the suit flat, six months rent in advance was given by East African Airways to the plaintiffs through their Brokers, Bhagwandas T. M. to the knowledge of the plaintiffs. . . . . . . . . . " (C) I say and submit that the suit flat in fact and in law was given by the plaintiffs to East African Airways on lease as a tenant. The plaintiffs know that the defendant No. 1 was acting for and on behalf of East African Airways and was their agent and employee. I say and submit that the plaintiffs entered into the transaction of letting out the suit flat in fact to East African Airways knowing all the time it was East African Airways who were the real lessees for the suit flat. It is significant that the plaintiffs are landlords and owners of the suit flat and there was nothing in law to prevent them from giving the suit flat on lease. The suit flat was given to and occupied by East African Airways exclusively and the entire occupation and control of the suit flat was with East African Airways. The plaintiffs have taken the Agreement dated 11-6-1974 and the declaration (Ex. "c" to the plaint) dated 11-6-1974 from the 1st defendant with ulterior motives, with mala fide intentions and with a view to avoid the provisions and protection of the Rent Act available to the occupants of the suit flat. 3 (a) From 1st March, 1997 East African Airways ceased to operate as aforesaid and thereafter the 3rd defendants commenced operation in India. By a Bilateral Agreement between the Government of Kenya and the Government of India the 3rd defendants, viz. Kenya Airways, have been recognized and accepted by the Government of Kenya and have been granted permission to operate the same services as were operated by East African Airways. After the 3rd defendants commenced operation in India, the 1st defendant continued to use and occupy the suit premises as Manager in India of the 3rd defendant.
( 5 ) THE aforesaid Notice of Motion was taken up for hearing when defendant Nos. 2 and 3 gave various undertakings which were recorded by the learned Single Judge in his order passed on the 23rd of November, 1978.
( 6 ) DEFENDANT No. 2 gave an undertaking not to alienate, dispose of or part with possession of the suit flat to any person, save and except the employees of the third defendant. The third defendant in turn, gave an undertaking not to alienate, encumber or part with possession of the suit flat or induct any person in the suit flat, save and except an officer of the defendant company who will be allowed to occupy the suit flat merely in his capacity as an employee of the third defendant and without having any right, title or interest in the suit premises. Both the defendant Nos. 2 and 3 gave an undertaking to deposit in Court an amount of Rs. 2,000/- per month. Liberty was given to the plaintiff to withdraw the amounts so deposited. A statement was made on behalf of the third defendant that if any officer is allowed to reside in the suit premises by the third defendant in place and stead of second defendant, the third defendant gave an undertaking in the Court to procure and to file in Court an undertaking from such future officer not to part with possession or induct any third party in the suit premises and that such undertaking shall be filed prior to the future officer being allowed to reside in the suit premises by the third defendant. Based on the aforesaid undertakings and statements the Court declined to appoint Court Receiver.
( 7 ) THE third defendant, on 24th of October, 1979, and the defendant No. 1 on 24th June, 1980 filed their written statements adopting the defence, taken in their respective Affidavits-in-reply, adverted hereinabove.
( 8 ) THE suit was taken up for hearing on the 1st of December, 1994 when, for the first time, after a period of about sixteen years, a contention was raised by and on behalf of defendant No. 3 as to the maintainability of the suit on the ground that the plaintiff had not obtained consent of the Central Government prior to the filing of the suit and hence the suit is liable to be dismissed in view of the provisions of law contained in section 86 of the Civil Procedure Code. 1908. A prayer was made to frame additional issues in respect of the aforesaid contention and for trying the same as preliminary issues. On 24th November, 1994 defendants took out Notice of Motion No. 2779 of 1994 raising the plea regarding the maintainability of the suit for want of a prior consent of the Central Government under section 86 of the Civil Procedure Code to file the suit. By an order passed on the 1st of December, 1994 the following additional issues were framed. . Whether the defendants proved that section 86 of the Code of Civil Procedure is applicable to the suit as framed as against all the defendants or either of them 2. Whether the suit is liable to be dismissed in entirety against all the defendants or in the alternative against defendant No. 3 in view of the admitted fact that the plaintiffs did not obtain prior consent of the Central Government to file this suit
( 9 ) IN the order, the learned Judge observed that the plaintiffs disputed that section 86 of the Code of Civil Procedure is applicable to this suit. The learned Judge further observed that it is of considerable significance that the suit was filed on the 3rd of August, 1978 and the contention based on applicability or non-applicability of section 86 of the Code of Civil Procedure was taken by the defendants for the first time on 24th November, 1994 as is obvious from Notice of Motion No. 2779 of 1994 taken out by the defendants. In the order the learned Judge has noted the contention raised on behalf of the plaintiff in the following terms: "the learned Counsel for the plaintiff informs the Court that without prejudice to his contention that section 86 of the Code of Civil Procedure is not attracted to the suit as framed, the plaintiff has now applied to the Central Government for its consent to continue this suit even if section 86 of the Code of Civil Procedure is held to be applicable. "
( 10 ) BY a separate order passed on the 1st of December, 1994 the learned Judge declined the request made on behalf of the defendants to try the aforesaid issues as preliminary issues by observing that the issue had been raised after almost the period of sixteen years. The said issue was directed to be tried alongwith the other issues at the hearing of the suit. The aforesaid order was carried by the third defendant to the Supreme Court. In the order passed by the Supreme Court on 11th August, 1995 a reference is made to the case of ("veb Dautrfraght Seereederi Restock (D. S. P. lines) Department of the German Democratic Republic, New Central Jute Mills Co. Ltd. and another") reported in 1994 (1) S. C. C. 282 wherein it has been observed, as under:-"in the present case, the appellant having been held to be a foreign State within the meaning of section 86 and the plaintiff-respondent not having obtained the consent of the Central Government, as required by section 86, the suit filed on its behalf was not rightly entertained by the trial Court. The question whether a suit should be entertained, cannot be deferred, till the stage of the final disposal of the suit, because that will serve neither the interest of the plaintiff nor of the defendant. The object of section 86 is to save foreign States from being harassed by defending suits in which there are hardly any merits. If the foreign State is required to file written statement and to contest the said suit and only at the stage of final disposal, a verdict is given whether in the facts and circumstances of the case such foreign State is entitled to the protection of section 86 of the Code, the very object and purpose of section 86 shall be frustrated. The bar of section 86 can be taken at the earliest opportunity and the Court concerned is expected to examine the same. "after making reference to the aforesaid decision, Supreme Court has proceeded to rule, as under :--in view of the aforesaid judgment, the trial Judge has to first hear the parties on the question as to whether the appellant can be held to be a foreign State within the meaning of section 86 and as to whether the plaintiff respondent was required to obtain consent of the Central Government as required by section 86 of the Code.
( 11 ) BEFORE the Supreme Court reliance was placed on behalf of the plaintiff to the communication dated 2nd of June, 1995 addressed to the plaintiff from the Ministry of External Affairs, Government of India, saying that no permission, as required by section 86 of the Code, is necessary, in the facts and circumstances of the case. The Supreme Court observed that it will be open to the plaintiff to file such communication before the trial Court which shall be taken into consideration while deciding the applicability of section 86 of the Code.
( 12 ) THE aforesaid preliminary issues were accordingly taken up for consideration by the learned Single Judge in terms of the directions of the Supreme Court. By a judgment and order dated 26th February, 1996, the learned Judge has found that the defendants have failed to prove or bring before the Court any material to show that the third defendants are the undertaking of the Government of Republic of Kenya. Neither is the property of the third defendant, nor its ownership, vests in Government of Kenya. Third defendant, therefore, cannot be categorized as foreign State. Third defendant, therefore, was not entitled to the protection of section 86 of the Code of Civil Procedure.
( 13 ) TAKING exception to the aforesaid judgment and order dated 26th of February, 1996, the third defendant has preferred the present appeal.
( 14 ) WE have heard the learned Counsel appearing for the contending parties at considerable length. What strikes us, at the out set, is the fact that the defendants have raised the issue in regard to immunity based on the provisions of section 86 of the Code after a lapse of almost sixteen years from the date of filing of the suit. The suit is filed on the 29th of July, 1978 whereas the present contention is, for the first time, raised on the 24th of November, 1994. In the meanwhile, defendants have virtually submitted themselves to the jurisdiction of the Court by appearing in the suit. Not only they have appeared in the suit but they have also participated in the Notice of Motion No. 1012 of 1978 taken out by the plaintiffs for appointment of Court Receiver. They have furnished undertakings and made statements based on which prayer of Court Receiver has been declined. The undertakings and statements have been duly recorded in the order passed on 23rd November, 1978. In their respective statements defendant Nos. 1 and 3 have averred that the third defendant company is an international airways company wholly owned by the Government of Kenya. Its management is controlled from Kenya, Africa. Its affairs are managed in India by persons appointed as Manager by the Head Office in Nairobi. Having said this, they have failed to raise the contention under section 86 of the Code. It has been contended on behalf of the third defendant that so far as the bar of section 86 is concerned, the law was not settled till the decision in the case of "v. D. S. Rostock (D. S. P. Lines), A. I. R. 1994 S. C. 516 was delivered. It is only by this decision the Supreme Court has settled the law with regard to commercial transactions. The defendants have, after the said decision was rendered, taken up the present contention. Till the aforesaid decision was rendered, defendants, did not have knowledge of their right that was available to them. No question, therefore, of waiver can arise. Reliance is placed on a decision of the Supreme Court in the case of (M/s. Motilal Padampat Sugar Mills Co. Ltd. v. The State of Uttar Pradesh and others) A. I. R. 1979 S. C. 621 wherein it is observed, as under:"5. . . . . . . . . . . it is elementary that waiver is a question of fact and it must be properly pleaded and proved. No plea of waiver can be allowed to be raised unless it is pleaded and the factual foundation for it is laid in the pleadings. Here it was common ground that the plea of waiver was not taken by the State Government in the affidavit filed on its behalf in reply to the writ petition, nor was it indicated even vaguely in such affidavit. It was raised for the first time at the hearing of the writ petition. That was clearly impermissible without an amendment of the affidavit in reply or a supplementary affidavit raising such plea. . . . . . . ""6. . . . . . . WAIVER means abandonment of a right and it may be, either express or implied from conduct, but its basic requirement is that it must be "an intentional act with knowledge. . . . . . . There can be no waiver unless the person who is said to have waived is fully informed as to his right and with full knowledge of such right, he intentionally abandons it. . . . . . . The claim of the appellant to exemption could be sustained only on the doctrine of promissory estoppel and this doctrine could not be said to be so well defined in its scope and ambit and so free from uncertainty in its application that we should be compelled to hold that the appellant must have had knowledge of its right to exemption on the basis of promissory estoppel at the time when it addressed the letter dated 25th June, 1970. In fact in the petition as originally filed, the right to claim total exemption from sales tax was not based on the plea of promissory estoppel which was introduced only by way of amendment. Moreover, it must be remembered that there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that it is not a correct statement; there is no such maxim known to the law. . . . . . . "
( 15 ) AS far as section 86 of the Code is concerned, the same is not a new provision. The same has been on the statute right from its inception. Section 86 in the present form has been on the statute after its amendment in 1976 with effect from 1st of November, 1977. The defendants, in their written statement, have averred that the third defendant company is international airways company wholly owned by the Government of Kenya. It is further averred that the management is controlled from Kenya, Africa and its affairs are managed in India by officers appointed as Manager by the head office in Nairobi, Kenya. Having made the aforesaid averments nothing prevented the defendants to raise the plea under section 86. The Supreme Court in the aforesaid decision in the case of D. S. P. lines (supra) has not laid down a new law. It has merely construed and explained the provisions contained in section 86. The said decision cannot be construed as having conferred on the defendants a new right. It has merely explained the right which has already been conferred by the section. Reference to the aforesaid decision of the Supreme Court, in our view, can be no answer to the plea of waiver raised by the plaintiffs. As far as the plaintiffs are concerned, they have immediately, after the plea is raised by the defendants, raised the plea of waiver. The learned Judge, in para 14 of her order, has made a reference to the issue of waiver raised by the plaintiff. She has, however, given no finding thereon in view of her finding that the third defendant cannot be held to be a foreign State within the meaning of section 87 of the Code. In our judgment, it is not open to the defendants to raise the plea for the first time after almost sixteen years of the filing of the suit after submitting themselves to the jurisdiction of the Court. They have filed their appearances and appeared in the proceedings. They have given undertakings and made statements thereby avoided appointment of Court Receiver. They have filed their respective written statements wherein this plea has not been raised. Having submitted to the jurisdiction of the Court they would be deemed to have waived their right if any under section 86 of the Code. They can not, therefore, be permitted to raise the plea in respect of maintainability of the suit under section 86 of the Code. Present suit, thereafter, cannot be held to be not maintainable on the ground of want of consent under section 86 of the Code.
( 16 ) THIS takes us to the question, whether the third defendant is the foreign State within the meaning of the said term in section 86 of the Code and, whether the present suit, which has been filed without the consent of the Central Government, is maintainable.
( 17 ) MR. Presswala, who appears on behalf of the appellant/defendant No. 3 has submitted that the doctrine of Sovereign Immunity is that a foreign State cannot be sued or impleaded in the courts of another foreign State against its will. This doctrine is applicable to the foreign Government or its department of State or anybody which can be regarded as its alter ego or organ of Government. Section 86 (2) (b) of the Code also recognizes that this immunity is available to a State. Thus, sovereign immunity as restricted by section 86 is available to a foreign State which trades by itself or by setting up separate legal entities such as a company incorporated under the Companies Act. Any plea of Sovereign immunity by a corporate undertaking of a Foreign State has to be examined on the basis of materials produced on behalf of such undertaking or Corporation. Thus, what is required to be seen is whether the body incorporate is the alter ego or second self of the foreign State. In countries like Great Britain, U. S. A. , Germany the doctrine of sovereign immunity is restricted in the sense that it is applicable to sovereign Acts and not to Commercial Acts of a foreign State and morever there is no provision like section 86 of the Civil Procedure Code in those countries. In India, no distinction is drawn between the Sovereign Acts and Commercial Acts of a foreign State and it has immunity for both subject to the provisions of section 86 of the Code namely that a foreign State can be sued in India after obtaining prior consent of the Central Government in writing and such permission can be given only for cases which fall within Clause (a) to (d) of section 86 (2 ). Foreign States can also be sued in India if it has waived its right to Sovereign immunity.
( 18 ) MR. Presswala has drawn our attention to the Certificate of Incorporation which shows that the third defendant has been incorporated under the Companies Act on 22nd of January, 1977. He has drawn our attention to the Memorandum and Articles of Association of the third defendant. The Articles of Association shows that there are two share holders (1) Permanent Secretary to the Treasury, a Body Corporate under Chapter 101 of the laws of Kenya, Nairobi and (2) Samuel Rede Ogembo, Permanent Secretary to the Ministry of Power and Communications, Nairobi. The share holder at Serial No. 1 hold 4,99,999 shares whereas the one at Serial No. 2 holds one share. The third respondent is a private company and hence its share holders are limited to 50. Any invitation to the public to subscribe to any shares or debentures of the company is prohibited. Memorandum and Articles of Association provides for transfer of shares. Article 30 thereof provides as under :--"30. The transfer of any share in the Company shall be in writing in any usual or common form and shall be signed by the transferor and the transferee. The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register of members in respect thereof. All instruments of transfer, when, registered, shall be retained by the Company. "according to Mr. Presswala though transfer of shares is permissible under the Memorandum and Articles of Association until such time that the share are in fact or actually transferred the company will wholly be owned and governed by the Government. It will continue to be a Government Company till shares are actually transferred.
( 19 ) MR. Presswala has next placed reliance on a certificate dated 12th October, 1994 issued by the Acting High Commissioner, Kenya High Commission, New Delhi to the following effect: this is to confirm that Kenya Airways is a Company incorporated in Kenya in accordance with the laws of Kenya, with the Government of the Republic of Kenya being the only shareholder and as such Kenya Airways is an Instrumentality/department of the Government of Kenya. "
( 20 ) MR. Presswala has placed strong reliance on a decision of the Supreme Court in the case of Veb Deaufracht Seereederei Restock (D. S. P. Lines) a Department of the German Democratic Republic v. New Central Jute Mills Co. Ltd. and another, (1994) S. C. C. 282 : A. I. R. 1994 S. C. 516 where it has been observed, as under :-"5. One of the principles of International Law is that every sovereign State respects the independence of every other foreign State. This absolute independence and the international comity underlines, the relationship between sovereign States. The object of section 86 of the Code is to give effect to the principles of International Law. But, in India it is only a qualified privilege because a suit can be brought with the consent of the Central Government in certain circumstances. Just as an independent sovereign State may statutorily provide for its own rights and liabilities to sue and be sued so can it provide rights and liabilities of foreign States to sue and be sued in its courts. It can be said that effect of section 86 thus is to modify the extent of doctrine of immunity recognized by the International Law. 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 to any foreign State to rely on the doctrine of immunity. Sub-section (1) of section 86 says in clear and unambiguous terms that no foreign State may be sued in any Court, except with the consent of the Central Government certified in writing by the Secretary to that Government. Sub-section. (2) prescribes that such consent shall not be given unless it appears to the Central Government that the case falls within any of the Clauses (a) to (d) of sub-section (2) of section 86. Sub-section (6) enjoins that where a request is made to the Central Government for the grant of any consent referred to in sub-section (1), the Central Government shall before refusing to accede to the request in whole or in part, give to the person making the request a reasonable opportunity of being heard. On a plain reading of different sub-sections of section 86, it is apparent that no foreign State may be sued in any Court in India, except with the consent of the Central Government which has to be certified in writing by the Secretary to that Government. 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 all 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 civil nature in view of section 9 of the Code. But, section 9 itself recognizes the limitation on such courts to try any suit the cognizance 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. ""6. The stand of the respondent is that as the dispute has arisen in connection with a commercial contract section 86 shall not be applicable. According to the respondent, the framers of the Code, while recognizing the sovereignty and the immunity of the foreign States on principles recognized by the International law, never purported to give immunity to the breach and contravention of the terms of the contract entered on behalf of the foreign State, which has nothing to do directly or indirectly with the sovereignty of the one State or the other but relates to commercial trade between the two States. There cannot be any conceivable object to keep such contracts within the scope of section 86. As a first impression, this looks attractive. But, from bare reference to sub-section (2) (b) of section 86, it shall appear that it requires such consent of the Central Government even in respect of agreements relating to commercial or trading contracts, because it says that such consent "shall not be given, unless it appears to the Central Government that the foreign State. . . . . . . . by itself or another, trades within the local limits of the jurisdiction of the Court". If sub-section (2) (b) of section 86 itself prescribes that the consent to sue shall not be given unless it appears to the Central Government that the foreign State which is being sued, by itself or by any other authority, trades within the local limits of the jurisdiction of the Court, how it can be held that such consent is not required in connection with commercial contracts. If for granting consent the Central Government is required to be satisfied as to whether foreign State, by itself or by any other authority, trades within the local limits of the jurisdiction of the Court concerned, then can it be urged that commercial contracts relating to trade and business having been entered on behalf of a foreign State are beyond the purview of section 86 of the Code""7. This Court in the case of (Mirza Ali Akbar Kashani v. United Arab Republic) 1966 (1) S. C. R. 319 : A. I. R. 1966 S. C. 230, pointed out in respect of section 86 at p 236 of A. I. R. :--". . . . , Section 86 (1) proceeds to prescribe a limited liability against foreign States. The limitation on the liability of foreign States to be sued is twofold. The first limitation is that such a suit cannot be instituted except with the consent of the Central Government certified in writing by a Secretary to that Government. This requirement shows the anxiety of the Legislature to save foreign States from frivolous unjustified claims. The second limitation is that the Central Government shall not give consent unless it appears to the Central Government that the case falls under one or the other of Clauses (a) to (d) of section 86 (2 ). ""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 States. 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 juristic 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) 1957 (1) QB 438, 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 organization 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. ""10. . . . . . . But, at the same time, it must be impressed that any plea of immunity raised by a corporate undertaking of a foreign State, has to be examined on the basis of materials produced on behalf of such undertaking or corporation. The initial onus of establishing that such corporation or undertaking had right to immunity, must be discharged. If it satisfied the Court that because of any constitutional provision, although such corporation has its separate legal entity, still it shall be deemed to be a department of the State for purpose of immunity, then only the onus will shift to the plaintiff to disprove any such claim. "
( 21 ) BASED on the aforesaid decision Mr. Presswala has contended that provisions of section 86 apply not only in respect of sovereign Acts of a foreign State but also in respect of agreements related to commercial or trading contracts, as is clear from the provision of sub-section (2) (b) of section 86. Since section 86 will be applicable to defendant No. 3 and as plaintiffs have not obtained the consent of the Central Government the present suit is liable to be dismissed at-least as far as the third defendant is concerned.
( 22 ) MR. Presswala next relied upon a case of (Deepak Wadhwa v. Aeroflot) 1983 (24) Delhi Law Times 1. The plea raised by Aeroflot before the Delhi High Court was that Aeroflot (Soviet Airlines) is a General Department of International Air services of the U. S. S. R. ; that it is a Governmental organization of the Union of Soviet Socialist Republics and all its belongings are the property of the U. S. S. R. ; that it is a foreign State within the meaning of the expression as used in section 86 of the Code of Civil Procedure, 1908; that it could not be sued except with the consent of the Central Government certified in writing by a Secretary to that Government as provided in sub-section (1) of section 86 and that the requisite consent has not been obtained. Similarly no decree can be executed against the property of a foreign State except with the consent of the Central Government by a Secretary to that Government as provided in sub-section (3) of section 86. The Delhi High Court, in the light of the aforesaid plea, has observed, as under:"5. The doctrine of sovereign immunity is that a sovereign State should not be sued or could not be impleaded in the courts of another sovereign State against its will. The doctrine grants immunity to a foreign Government or its Department of State or anybody which can be regarded as an alter ego or organ of the Government. Every sovereign State respects the independence of every other sovereign State and as a consequence declines to exercise by means of any of its courts jurisdiction over the person of any sovereign or over the public property of any State. . . . . . . "the contention raised on behalf of Aeroflot has been summarized in para 6 of the judgment, as under :"6. The Counsel urges that there has since been a transformation of functions of a State. They are no longer restricted to the traditional functions of a sovereign. The State has entered into commercial activities. This transformation in the function of a sovereign State has modified the rule of the international law relating to absolute immunity. Most of the countries have replaced it by a doctrine of restrictive immunity. This doctrine gives immunity to acts of a Governmental nature, described in Latin as jure imperii, but no immunity to acts of a commercial nature, jure geslionis. Reference is made by the Counsel to the development in this modern rule of law in the English Courts. In (Rahimtoola v. The Nizam of Hyderabad and others) 1957 (3) All. E. R. 441, Lord Denning said that if the dispute concerns, for instance, the commercial transactions of a foreign Government, whether carried on by its own departments or agencies or by setting up separate legal entities, and it arises properly within the territorial jurisdiction of English Courts, there is no ground for granting immunity. Again in (Thai-Eurupe Tapioca Service Ltd. v. Government of Pakistan) 1975 (3) All. E. R. 961, it was stated that a foreign sovereign has no immunity when it enters into a commercial transaction with a trader in England. In (Trendex Trading Corporation Ltd. v. Central Bank of Nigeria) 1977 (1) All. E. R. 881 there is a detailed discussion of the transformation of the rule of international law which form part of English law. The doctrine of restrictive immunity was adopted by the Court of Appeal. The House of Lords accepted it in ("congreso del Partido") 1981 (2) All. E. R. 1064. It was held that actions, whether commenced in personam or in rem, were to be decided according to the restrictive theory of sovereign immunity so that a sovereign State had no absolute immunity as regards commercial or trading transactions. "the Delhi High Court has proceeded to observe, as under :--"8. I will trace the development of the doctrine in India. The question of sovereign immunity came to be considered in India in the early last century primarily whether the Rulers, Chiefs and Princes had a status rendering them exempt from the jurisdiction of the courts. Certain rulers were held to be sovereign or semi-sovereign and immunity was granted even though they were acting in their capacity of traders carrying on business in British territory. There is a circular order dated March 4, 1836 of the old Sadar Diwani Adalat of Bengal which declared that "civil claims against independent chiefs, whether by their subjects or by others, cannot be taken cognizance of by the courts". This was not altered by the first Civil Procedure Code of the year 1859. When the Code was enacted in 1877, the courts in England had already recognized the absolute privilege enjoyed by independent sovereigns and their ambassadors in the courts in England, in accordance with the principles of international law. Section 433 of the Code of 1877 did not grant an absolute immunity. It was made dependent upon the consent of the Government certified by the signatures of one of its Secretaries which could be given only under specified conditions. The consent was not to be given unless (a) the Prince, Chief, Ambassador or envoy has instituted a suit in such Court or (b) the Prince, Chief, Ambassador or envoy himself or another trades within the local limits of the jurisdiction of such courts or (c) the Subject matter of the suit is immovable property situated within the local limits and in possession of the Prince, Chief, Ambassador or envoy. Commercial activity carried on was considered even at that time as one of the considerations for granting the consent. "this modified or conditional privilege is based upon essentially the same principle as the absolute privilege, the dignity and independence of the Ruler which would be endangered by allowing any person to sue him at pleasure and the political inconveniences and complications which would be the result. Section 433 constituted a modification of the international rule for Indian purposes "as expressed by Strachey, J. , in (Chandulal Khushji v. Awad Bin Umar Sultan Nawaz Jung Bahadur) 1986 (21) Bombay 351. The Code of 1882 enacted the same provisions as of the Code of 1877. Under the unamended Code of 1908 any such Prince or Chief, and any ambassador or envoy of a foreign State could be sued with the requisite consent, but not without such consent, in a competent Court in India. Again the same three conditions were specified in section 86 (2) of the Code. The giving of the consent was circumscribed and made dependent on the satisfaction about the existence of one of the conditions. There was a legislative extension of the jurisdiction over a sovereign though under the International Law even at that time, there was absolute immunity. The sovereigns, whether their powers in their States be absolute or limited, could be sued in England on their obligations whether ex contracts, quasi ex contracts or ex delicto. In the objects and reasons contained in Clause 30 while enacting Act 104 of 1976 the principle enunciated by Strachey, J. , is restated. The concept of the Ruler of a foreign State was over-emphasized in the Code and that was the reason to amend it to "foreign State". No absolute immunity is provided. The suit could still be instituted with the consent of the Central Government obtained in the prescribed manner and given on satisfaction of one of the conditions including the commercial activity of the sovereign. Whatever the principle of international law may have been, the courts in India were concerned with the statutory form given in section 433 of the Code of 1877, in section 86 of the Code prior to the Code of Civil Procedure (Amendment) Act 1951, and now in sections 86 and 87 of the Code of 1908, as it stands amended by Amendment Act, 104 of 1976. The Legislature did not think it proper to adopt the rule of international law with the developments from time to time or in entirety as existing on the date of the enactment. As the preamble to Act V of 1908 says, it is an Act to consolidate and amend the laws relating to procedure of the courts of Civil Judicature. . . . "according to Mr. Presswala the aforesaid decision, though rendered by a learned Single Judge of the Delhi High Court, is on all fours with the case at hand as the facts of that case are in para materia to those of the present case.
( 23 ) MR. Presswala next placed reliance on a nine Judge judgment of the Supreme Court in the case of (State Trading Corporation of India Ltd. v. The Commercial Tax Officer and others) A. I. R. 1963 S. C. 1811. The question which were considered by the Supreme Court in the aforesaid judgment were, (i) whether the State Trading Corporation, a company registered under the Indian Companies Act, 1956, is a citizen within the meaning of Article 19 of the Constitution and can ask for the enforcement of fundamental rights granted to citizens under the said article, and (ii) whether the State Trading Corporation is, notwithstanding the formality of incorporation under the Indian Companies Act, 1956 in substance a department and organ of the Government of India with the entirety of its capital contributed by Government and can it claim to enforce fundamental rights under Part III of the Constitution against the State as defined in Art. 12 thereof. Sinha, C. J. (on behalf of himself, S. K. Das; P. B. Gajendragadkar; A. K. Sarkar; K. N. Wanchoo and N. Rajagopala Ayyangar, JJ. , has not answered the second question by observing, as follows :---24. In view of this answer, we do not consider it necessary to answer the second question as that would have arisen only if the first question had been answered in the affirmative. " justice Hidayatullah, J. , has answered the second question by observing, as under :-"31. . . . . . . In my opinion, the State Trading Corporation cannot be said to be a citizen either by itself or by taking it as the aggregate of citizens that nationality of a corporation is a different concept not to be confused with citizenship of natural persons, that the word citizen in Article 19 (1) sub-Clause (f) and (g) refers to a natural person, that State Trading Corporation is really a Department of Government behind the Corporate veil and that for all these reason the two questions must be answered in favour of the objectors. . . . . . . ""65. The next question is whether the State Trading Corporation is a department or organ of Government notwithstanding the formality of incorporation. On behalf of the corporation it is contended that if the Corporate veil is pierced one sees that the right to invoke Article 19 (1) (f) and (g) is being claimed by three persons who are admittedly citizens of India namely the President of India and the two secretaries. The contention on the other side is that the corporate veil cannot be pierced at all and that if it is, then behind that veil there is the Government of India. ""68. In my judgment it is not possible to pierce the veil of incorporation in our country to determine the citizenship of the members and then to give the corporation the benefit of Article 19. If we did pierce the veil and saw that the corporation was identical with Government there would be difficulty in giving relief unless we held that the State can be its own citizen. . . . . . . "justice J. C. Shah, in his dissenting judgment, has observed, as follows:--"113. The first part of the second question raises what is essentially a question of fact. The State Trading Corporation was, on the date of the petition, functioning under the direct supervisions of the Government of India, the share holding was in the names of the President and two secretaries to the Government and its entire subscribed capital was contributed by the Government of India. But it is a commercial body, incorporate as the Memorandum of Association indicates to organize and undertake trade generally with State Trading countries as well as other countries in commodities entrusted to it for such purpose by the Union Government from time to time and to undertake purchase, sale and transport of such commodities in India or anywhere else in the world and to do various acts for that purpose. The Articles of Association make minute provisions for sale and transfer of shares, calling of general meetings, procedure for the general meetings, voting by members, Board of Directors and their powers, the issue of dividend, maintenance of accounts and capitalization of profits. The State Trading Corporation has been constituted not by any special statute or charter but under the Indian Companies Act as a Private Limited Company. It may be wound up by order of a competent Court. Though it functions under the supervision of the Government of India and its Directors, it is not concerned with performance of any governmental functions. Its functions being commercial, it cannot be regarded as either a department or an organ of the Government of India. It is a circumstances of accident that on the date of its incorporation and thereafter its entire share-holding was held by the President and the two Secretaries to the Government of India. "justice Das Gupta, has concurred with justice J. C. Shah, by observing, as follows:--"88. On the other question that has been referred, I agree with the conclusion of my learned brother Shah, J. , that, the State Trading Corporation is not in substance a department and organ of the Government of India. As I entirely agree with the reasoning on which he has based this conclusion, I do not propose to discuss the matter further. "
( 24 ) IT would appear that as per Hidayatullah, J. , the State Trading Corporation is a department of Government. According to him, if one were to lift the veil of incorporation it will be found that the entire share capital is subscribed by the Government of India, the shareholders are the President of India and two Secretaries to the Government in their official capacities and that its management is a governmental function for the benefit of the nation. None of the share holders holds a share or shares for their personal benefit or enjoyment. None of them has paid for the shares held in their name. The administration of the affairs of the corporation though technically a company, is a concern of the Government of India. The legal and beneficial ownership of the corporation vests in the Government of India. If the veil is lifted one would find the Government of India.
( 25 ) THE contrary view, which has been expressed by Justice J. C. Shah with Das Gupta, J. , has found that the State Trading Corporation is a private limited company which is capable of being wound up by a Competent Court. It is not concerned with performance of any governmental functions but engaged in commercial activities and hence cannot be regarded as either a department or an organ of the Government of India.
( 26 ) MR. Presswala next relied on the case of (Kuwait Airways Corp. v. Iraqi Airways Co. and others) 1995 (3) All. E. R. 694. One of the question raised for determination in the case was, whether I. A. C. (Iraqi Airways Co.), as a separate entity, was entitled to immunity under sections 14 (2) of the 1978 Act, which provided that a separate entity was immune from the jurisdiction of the courts of the United Kingdom if, and only if - (a) the proceedings relate to anything done by it in the exercise of sovereign authority; and (b) the circumstances are such that a State. . . would have been so immune, and (iv) whether the proceedings related to issues which were not justifiable in the English courts because they concerned sovereign acts of Iraq in the conduct of its foreign affairs with Kuwait and the lawfulness of sovereign acts of Iraq in respect of transfer of control of the aircraft to I. A. C. The question was answered, thus: (3 ). . . . . . Applying that principle, the taking of the aircraft and their removal from Kuwait airport to Iraq constituted an exercise of governmental power by the State of Iraq and, in so acting, I. A. C. was acting in the exercise of sovereign authority and was entitled to State immunity. However (Lord Mustill and Lord Slynn of Hadley dissenting), after R. C. C. Resolution 369 came into effect IACs retention and use of the aircraft as its own were not acts done in the exercise of sovereign authority but were done pursuant to the Iraqi legislation which vested the aircraft in IAC. Accordingly, IAC was not entitled to claim State immunity in respect of the acts alleged to have been performed by IAC after the coming into effect of R. C. C. Resolution 369. . . . . . . "
( 27 ) THE aforesaid decision indicates that when a Government Company performs a sovereign function such a removal of aircraft, during war, was a sovereign function which entitle immunity whereas when the aircraft is used for commercial purposes the same would not be a sovereign function and hence would not be entitled to State immunity.
( 28 ) MR. Presswala further cited a case of Trendtex Trading Corporation Ltd. v. Central Bank of Nigeria, 1977 (1) All. E. R. 881 which has explained "alter ego" or organ of Government, as follows: "if we are still bound to apply the doctrine of absolute immunity, there is, even so, an important question arising on it. The doctrine grants immunity to a foreign Government or its department of State, or anybody which can be regarded as an alter ego or organ of the Government. But how are we to discover whether a body is an alter ego or organ of the Government. ""the cases on this subject are difficult to follow, even in this country, let alone those in other countries. And yet, we have to find what is the rule of international law for all of them. It is particularly difficult because different countries have different ways of arranging internal affairs. In some countries the government departments conduct all their business through their own offices - even ordinary commercial dealings - without setting up separate corporations or legal entities. In other countries they set up separate corporations or legal entities which are under the complete control of the department, but which enter into commercial transactions, buying and selling goods, owing and chartering ships, just like any ordinary trading concern. This difference in internal arrangements ought not to affect the availability of immunity in international law. A foreign department of state ought not to lose its immunity simply because it conducts some of its activities by means of a separate legal entity. . . . "
( 29 ) AS against this Mr. Zaiwala appearing on behalf of the respondent, has placed reliance on a decision of (Heavy Engineering Mazdoor Union v. State of Bihar and others) A. I. R. 1970 S. C. 82. The Court was considering the status of the Heavy Engineering Corporation Ltd. , Ranchi, a company incorporated under the Companies Act, 1956. Its entire share capital was contributed by the Central Government and all its shares have been registered in the name of the President of India and certain officers of the Central Government, being a Government Company within the meaning of section 617 of the Companies Act. The Court has observed, as under:-"4. . . . . . . It is an undisputed fact that the company was incorporated under the Companies Act and it is the company so incorporated which carries on the undertaking. The undertaking, therefore, is not one carried on directly by the Central Government or by any one of its departments as in the case of posts and telegraphs or the railways. . . . . . . . Therefore, the mere fact that the entire share capital of the respondent-company was contributed by the Central Government and the fact that all its shares are held by the President and certain officers of the Central Government does not make any difference. The company and the share-holders being, as aforesaid, distinct entities the fact that the President of India and certain officers hold all its shares does not make the company an agent either of the President or the Central Government. . . . . . . ""5. It is true that besides the Central Government having contributed the entire share capital, extensive powers are conferred on it, including the power to give directions as to how the company should function, the power to appoint directors and even the power to determine the wages and salaries payable by the company to its employees. But these powers are derived from the company’s memorandum of association and the articles of association and not by reason of the company being the agent of the Central Government. The question whether a corporation is an agent of the State must depend on the facts of each case. Where a statue setting up a corporation so provides such a corporation can easily be identified as the agent of the State. . . . . . . . . In the absence of a statutory provision, however a commercial corporation acting on its own behalf even though it is controlled wholly or partially by a Government department, will be ordinarily presumed not to be a servant or agent of the State. The fact that a minister appoints the members or directors of a corporation and he is entitled to call for information, to give directions which are binding on the directors and to supervise over the conduct of the business of the corporation does not render the corporation an agent of the Government. "a reference is made to the case of "state Trading Corporation of India (supra) and it is observed, as under :--"such an inference that the corporation is the agent of the Government may be drawn where it is performing in substance governmental and not commercial functions. . . . . . . "
( 30 ) THE aforesaid decision, it is pointed out by Mr. Presswala, has been subsequently over ruled in the case of (Air India Statutory Corporation etc. v. United Labour Union and others, etc.) A. I. R. 1997 S. C. 645. In para 9 of the judgment, second question was, whether the view taken in Heavy Engineering case, A. I. R. 1970 S. C. 82 is correct in law The Supreme Court has made the following conclusions: 26. From the above discussion, the following principles would emerge: (1) The constitution of the Corporation or instrumentality or agency or Corporation aggregate or Corporation sole is not of sole material relevance to decide whether it is by or under the control of the appropriate Government under the Act. (2) If it is a statutory Corporation, it is an instrumentality or agency of the State. If it is a company owned wholly or partially by a share capital, floated from public exchequer, it gives indicia that it is controlled by or under the authority of the appropriate Government. (3) In commercial activities carried on by a corporation established by or under the control of the appropriate Government having protection under Articles 14 and 19 (2), it is an instrumentality or agency of the State. (4) The State is a service Corporation. It acts through its instrumentalities, agencies or persons natural or juridical. (7) Though the instrumentality, agency or person conducts commercial activities according to business principles and are separately accountable under their appropriate bye-laws or Memorandum of Association, they become the arm of the Government. (8) The existence of deep and pervasive State control depends upon the facts and circumstances in a given situation and in the altered situation it is not the sole criterion to decide whether the agency or instrumentality or persons is by or under the control of the appropriate Government. ""28. From this perspective and on deeper consideration, we are of the considered view that the two-Judge Bench in Heavy Engineering case, A. I. R. 1970 S. C. 82 narrowly interpreted the words "appropriate Government" on the common law principles which no longer bear any relevance when it is tested on the anvil of Article 14. . . . . . . It is to reiterate that Heavy Engineering case is based on concession. . . . . . ""29. In the light of the above principles and discussions, we have no hesitation to hold that the appropriate Government is the Central Government from the inception of the Act,. . . . . . "
( 31 ) MR. Zaiwala next relied on the case of (Western Coalfields Ltd. v. Special Area Development Authority, Korba and another) and (Bharat Aluminium Company Ltd. v. Special Area Development Authority, Korba and others) A. I. R. 1982 S. C. 697. The case related to the liability of the Western Coalfields Ltd. and Bharat Aluminium Company Ltd. , which are Government Companies, towards payment of property tax. The aforesaid companies disputed their liability to pay property tax on the grounds principally that no tax was liable on its property since the company was owned wholly by the Government of India and that the Municipal Corporation was estopped from levying the property tax in view of Article 285 of the Constitution of India. In the context, the Court observed, as under : even though the entire share capital of the companies has been subscribed by the Government of India, it cannot be predicated that the companies themselves are owned by the Government of India. The companies, which are incorporated under the Companies Act, have a corporate personality of their own, distinct from that of the Government of India. The lands and buildings are vested in and owned by the companies, the Government of India only owns the share capital. . . . . . . " the aforesaid companies were accordingly found liable to pay property tax on the ground that though owned or controlled by the Government were still companies under the Companies Act.
( 32 ) MR. Zaiwala next relied on the case of (Accountant and Secretarial Services Pvt. Ltd. and another v. Union of India and others) A. I. R. 1988 S. C. 1708. The question, which had arisen for consideration was, whether the West Bengal Public (Eviction of Unauthorized Occupants) Act, 1971, which provides for eviction of unauthorized occupants from public premises to the extent it has been extended to premises belonging or taken on lease by corporation established by or under a Central Act and owned or controlled by the Central Government is ultra vires as it was beyond the legislative power of the Parliament to extend the applicability of the said Act to such premises he Supreme Court has observed, as under :"13. . . . . . . It is, however, common ground before us that though the bank is a corporation wholly owned and controlled by the Government, it has a distinct personality of its own and its property cannot be said to be the property of the Union. . . . . . . "here again a distinction is made between the Government and a corporation which is owned by the Government. It was held that the corporation is distinct from the Government and has a distinct personality of its own. The property of the Corporation belongs to the Corporation and cannot be said to be property of the Government.
( 33 ) MR. Zaiwala next relied on the case of (Royal Nepal Airline Corporation and another v. Monorama Meher Singh Legha and others) A. I. R. 1966 Calcutta 319. The Calcutta High Court, in the aforesaid decision, was considering a claim based by Nepal Airlines Corporation for sovereign immunity under section 86 of the Civil Procedure Code in a suit filed against it for damages on behalf of King of Nepal. The Calcutta High Court, after reviewing various decisions cited before it, concluded, as under :"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. "the aforesaid decision has, thus, up held the claim of the Airline which is a Corporation established by the Government of Nepal and which is engaged in commercial activities.
( 34 ) BEARING in mind the ratio of the aforesaid decisions, which have been cited before us, we will now proceed to determine, whether the appellant defendant No. 3 is a foreign State within the meaning of section 86 of the Code of Civil Procedure and whether it can claim immunity on the ground that no consent has been obtained from the Central Government as required by the aforesaid section. The Certificate of Incorporation of the third defendant shows that it is a Private Limited Company registered at Nairobi Kenya. The Memorandum of Association and the Article of Association of the respondent shows that it is engaged and carries on the business as carriers by air of passengers and goods in Kenya and elsewhere. It has the right to acquire and hold property; it has a right to amalgamate or enter into Partnership or into any arrangement including for sharing profits, to promote any other company or other body; to acquire and hold shares, debentures or other securities of any other company or body, to lend and advance money or give credit to any person or body and to engage in all the activities mentioned in the Memorandum of Association. The share capital of the company is held by two Government Officials, one the Permanent Secretary to the Treasury and the other a Permanent Secretary to the Ministry of Power and Communications, the former holding 4,99,999 shares and the later 1 share. The same provides as under :"the transfer of any share in the Company shall be in writing in any usual or common form and shall be signed by the transferor and the transferee. The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof. All instruments of transfer, when registered, shall be retained by the Company. "the learned Judge of the trial Court, on placing reliance on the aforesaid Article, has concluded that the defendant No. 3 is not a foreign State under section 86 of the Code. She has thereupon found that the suit as filed is maintainable even though no consent of the Central Government has been obtained. In our view, as long as the shares are wholly owned by the Government of Kenya and the same are not transferred to the public under the aforesaid Article, the third defendant has not ceased to be a Government Company. It is not uncommon that Government Companies are, after passage of time, privatised and are often made into public companies. If that were to happen then certainly the third defendant would lose the status of being a Government Company. However, as long as the company is fully owned and controlled by the Government of Kenya the same would be entitled to claim the immunity under section 86 of the Code. The said immunity would be available to the third defendant even though it is engaged in commercial activities as in India the sovereignty is not lost even though a foreign State Government may be engaged in commercial activities. We are, therefore, unable to concur with the contrary view expressed by the learned Single Judge. However, in view of our earlier finding that the third defendant has submitted to the jurisdiction of the Court by waiving its right under section 86 of the Code, we hold that the third defendant is not now entitled to claim the benefit of section 86 of the Code. Present suit, in our view, is maintainable even though no consent has been obtained by the plaintiff from, the Central Government.
( 35 ) THE ultimate finding of the trial Court is accordingly confirmed, though on grounds different from the ones taken by the learned Single Judge. Appeal, in the circumstances, is dismissed with costs.
( 36 ) AT this stage, Mr. Presswala prays for stay of the further proceedings in the suit for a period of six weeks in order to enable his client to approach the Supreme Court. Further proceedings in the suit are accordingly stayed for a period of six weeks.
( 37 ) EXPEDITE the issue of certified copy. Appeal allowed.
