Foreign State immunity under civil procedure law extends to commercial contracts, with prior government consent required before suit.

Section 86 of the Code of Civil Procedure is treated as a statutory modification of sovereign immunity: a foreign State or its department may invoke protection where the materials show that the entity forms part of the governmental machinery and is treated as nationally owned property. The provision extends to suits arising from commercial contracts, so prior consent of the Central Government remains necessary. The consent objection goes to maintainability and should be decided at the threshold before the suit proceeds.

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Issues: (i) whether the appellant was entitled to be treated as a foreign State or department thereof for the purpose of immunity from suit under Section 86 of the Code of Civil Procedure; (ii) whether the bar under Section 86 applied to a suit arising out of a commercial contract and required prior consent of the Central Government; (iii) whether the objection as to absence of consent had to be decided at the threshold.

Issue (i): whether the appellant was entitled to be treated as a foreign State or department thereof for the purpose of immunity from suit under Section 86 of the Code of Civil Procedure.

Analysis: The relevant inquiry was whether the corporate form of the appellant prevented it from claiming the protection of Section 86. The Court held that where the materials placed before the court, including the foreign constitution and official certificate, show that the undertaking is part of the governmental machinery and is treated as nationally-owned property, the entity may be regarded as a department of the foreign State for purposes of immunity. The initial burden lies on the entity claiming such protection to establish its status.

Conclusion: The appellant was treated as a foreign State department entitled to invoke Section 86.

Issue (ii): whether the bar under Section 86 applied to a suit arising out of a commercial contract and required prior consent of the Central Government.

Analysis: Section 86 was read as a statutory modification of sovereign immunity, and its language expressly extended to cases where the foreign State or its authority trades within the local limits of the court. The Court held that commercial dealings do not fall outside the provision; rather, they are within its contemplation, and a party seeking to sue must first approach the Central Government for consent. The object is not to shield bona fide traders from liability, but the statutory prerequisite of consent remains operative.

Conclusion: Prior consent of the Central Government was necessary even in respect of the commercial-contract claim.

Issue (iii): whether the objection as to absence of consent had to be decided at the threshold.

Analysis: The Court held that the bar created by Section 86 goes to the very maintainability of the suit and should be examined at the earliest stage. Deferring the question until final disposal would defeat the purpose of the provision by forcing a foreign State to undergo the burden of trial before the jurisdictional bar is resolved. The court entertaining the suit must therefore determine the consent objection before proceeding further.

Conclusion: The objection had to be decided at the threshold and could not be postponed to the stage of final disposal.

Final Conclusion: The suit was held not maintainable for want of prior consent under Section 86, and the trial court's dismissal of the plaint was restored.

Ratio Decidendi: A foreign State or its department may be sued in Indian courts only with prior consent of the Central Government, and that requirement extends to commercial transactions; the consent question is a threshold issue affecting maintainability.

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