No foreign rule of limitation shall be a defence to a suit instituted in India on a contract entered into with a foreign country, unless the foreign rule has extinguished the contract (i.e., has extinguished the obligation of the right itself) and parties were domiciled in such country during the prescribed period by such rule.
It is a general rule of international law that a contract with reference to its form, validity, interpretation and the rights and liabilities of the parties to it, is governed by the lex loci contracts the law of the place where the contract is made) while all matters of procedure are governed only by lex fori (law of the forum in which the action is brought). Questions of limitation of actions are governed by the lex fori because questions of limitation are essentially matters relating to procedure.
The rules which apply to the case of a contract made in one country and put in suit in the courts of another country are the following:
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ADVERTISEMENTS:
1. The interpretation of the contract is governed by the law of the country where the contract was made.
2. The mode of suing and the time within which the action must be brought is governed by the law of the country where the action is brought.
Thus, the mere fact that a suit on foreign contract is not barred under the foreign law will not enable the plaintiff to bring the suit on the claim barred in this country, as a person suing in this country should in matters of procedure “take the law as he finds it” here.
ADVERTISEMENTS:
Even where a suit has been dismissed in a foreign country (solely on the ground of limitation), fresh suit can be brought in this country within the period prescribed by the Limitation Act.
But if the foreign law of limitation has not only extinguished the right of action i.e., the remedy but also the right itself, foreign rule of limitation shall be a good defence to a suit, instituted in India, provided the parties were also domiciled in the said foreign country during the period prescribed by the rule of that country. The section is, in terms, applicable only to suits. The principle on which it is based is, however, of universal application and has been made applicable to applications also.