9911796707
TMI Blog1993 (10) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Electric Company (for short "General Electric"), respondent in C. A. Nos. 71 and 71A and the appellant in C. A. No. 370 of 1992 is a company incorporated under the laws of the State of New York in the United States of America and is engaged in the business of manufacturing, selling and servicing electrical products and various ancillary activities. After negotiations, the parties arrived at an arrangement whereunder General Electric was to supply to Renusagar the equipment and power services for setting up a thermal power plant to be known as "Renusagar Power Station" at Renukoot and, on November 27, 1963, Renusagar moved the Government of India for its approval. By its letter dated January 2, 1964, the Government of India gave its approval to the proposals and thereafter a formal contract was executed by the parties on August 24, 1964. Under the said contract, General Electric undertook to supply equipment and services for a plant having a capacity of 135,800 kw. The total price for the electrical and mechanical equipment, spare parts, freight forwarding services, plant design and consulting services was US dollars 13,195,000. The contract price for all electrical and mechanic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verned in all respects by the laws of the State of New York, USA (article XIX(A)). It was, also, provided that if General Electric received an exemption from the Government of India from the payment of income-tax levied by the Government of India on interest payments made by Renusagar then the interest rate on that series of promissory notes as exempted shall be reduced from 6V2 per cent. to 6 per cent. per annum commencing on the date such exemption is made effective and the notes so affected shall be replaced by new notes (article III(A)3(b)). In the contract, it was stated that General Electric intended to apply to the Central Government of India for exemption from income-tax on the interest (including capitalisation interest and interest thereon) and Renusagar undertook to assist General Electric in expediting the application of General Electric for exemption. It was also agreed that should the application of General Electric be denied Renusagar may withhold the Indian income-tax applicable to any payments of interest, but Renusagar was to furnish General Electric with receipts on all withheld amounts paid to the Government of India (article XIV(B)). By its orders dated Septe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estored and the liability of Renusagar for interest was reduced from 6½ per cent. to 6 per cent. On June 3, 1981, Renusagar moved the Reserve Bank of India for permission to remit the balance amount of regular interest calculated at 6 per cent. per annum to General Electric and on February 3, 1982, the Income-tax Officer, Bombay, issued "no objection certificate" for repatriating the balance regular interest amount of US dollars 2.130 million. The said amount was, however, not remitted by Renusagar to General Electric. It appears that there was some delay on the part of the General Electric in adhering to the time schedule for the supply of equipment and keeping the same in view General Electric by their letter dated January 5, 1967, agreed to defer the payment of the first instalment payable on June 30, 1967, by six months and suggested that the promissory notes shall be recast into 15 notes instead of 16 which would commence on the 36th month from the contract effective date and capitalised interest shall be calculated for 20 months instead of 14 months and the said interest would then be reduced by a sum of 132,500 US dollars. By another letter dated October 4, 1967, Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on December 31, 1968, was paid in instalments by December, 1973, and the fifth instalment which was payable on June 30, 1969, was paid in instalments by February, 1976. On March 1, 1982, General Electric served a notjce on- Renusagar indicating its intention to arbitrate pursuant to clause XVII of the contract. On March 2, 1982, General Electric made a request to the Court of Arbitration of the ICC for arbitration of the disputes between General Electric and Renusagar. ICC, after taking cognizance of the said request for arbitration made by General Electric, called upon Renusagar to nominate their arbitrator, file its reply and remit certain sums towards administrative expenses and arbitration fees. Renusagar raised an objection that the claims of General Electric did not fall within the purview of the arbitration clause in the contract and challenged the arbitrability of the claims. The arbitration court of the ICC accepted that there was a prima facie dispute within the agreement and appointed the Rt. Hon. Peter Thomes, O.C.MP as Chairman of the Arbitral Tribunal and confirmed the appointment of Prof. Boris I. Bittker as arbitrator nominated by General Electric and Dr. R. K. Dix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II of the contract. On August 19, 1982, General Electric filed a suit in the Calcutta High Court against the United Commercial Bank to enforce the bank guarantee given by the said bank at the instance of Renusagar. As a counter to the said suit, Renusagar, on November 25, 1982, filed a suit (No. 127 of 1982) in the Court of the Civil Judge, Mirzapur, U. P., praying for a declaration that the guarantee given by-the United Commercial Bank for and on behalf of Renusagar stood discharged and had become ineffective and unenforceable and for a mandatory injunction directing and ordering General Electric to settle the claim of Renusagar regarding 75 MVA transformers and to satisfy the settlement validly arrived at of the claim of Renusagar as mentioned in the plaint of the said suit. General Electric filed an application in the Mirzapur court whereby it was prayed that the suit was liable to be stayed under section 10 and/or section 151, Civil Procedure Code, in respect of the first relief and under section 3 of the Foreign Awards Act in respect of the second relief claimed by Renusagar in the plaint. The said application was rejected by the Mirzapur court and thereupon General Electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er advisers and issues Nos. (g) to (p) of para 22 of the terms of reference were argued and submitted for consideration by both the sides and the hearing was adjourned to a later date for more detailed consideration to be given to the remaining issues and for further written submissions to be made by both parties. The next hearing was fixed to be in London to begin on October 1, 1985, and both parties were summoned to appear before the Arbitral Tribunal. Khaitan and Partners, lawyers for Renusagar, sent a letter dated July 24, 1985, to the Arbitral Tribunal, wherein they stated that an Indian civil court had seisin of the whole of the subject-matter of the reference in this arbitration and submitted that in consequence the Arbitral Tribunal and the ICC had become functus officio and that no further proceedings in this arbitration should be taken by the Arbitral Tribunal. The said submission by Renusagar was disputed by General Electric and the Arbitral Tribunal informed the parties that the matter would be considered as a preliminary issue at the scheduled meeting in London on October 1, 1985. The scheduled meeting took place in London on October 1, 1985. General Electric, represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplications submitted by Renusagar to the Reserve Bank of India on June 3, 1981, and August 29, 1981, for permission to remit the said amount to General Electric amount to acknowledgment. It was also held that the said sum had to be computed in US dollars regardless of variation in the dollar-rupee exchange rate prevailing from time to time. As regards the claim for compensatory damages on the said amount of regular interest, which was withheld by Renusagar, the Arbitral Tribunal, after referring to the decisions of New York courts, has held that an arbitrator's paramount responsibility is to reach an equitable result and that it is a basic principle of damages for breach of contract applicable throughout the U.S. (including New York) that a party to a contract who is injured by its breach is entitled to compensation for the injury sustained and is entitled to be placed in so far as this can be done by money in the same position he would have occupied if the contract had been performed. The Arbitral Tribunal found that General Electric would have benefited "dollar for dollar" from the foreign tax credits that it could have claimed had Renusagar paid the disputed amounts over to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract the notes evidencing the obligation of Renusagar to pay the purchase price "shall bear interest, at the rate of 6.5 per cent. per annum on the outstanding principal balance", subject to the agreed reduction to 6 per cent. commencing with the date when tax exemption, if granted, is made effective and that the rescheduling negotiations on which Renusagar relied never resulted in an effective agreement and there was no evidence of a waiver by General Electric of its right to be paid on the original due dates when the rescheduling plan collapsed and further that Renusagar had acknowledged in telex dated March 25, 1976, that they were liable for interest on the delayed payment of the principal. The Arbitral Tribunal also rejected the contention that the claim of General Electric in this regard was barred by the statute of limitation. Taking into account the acknowledgment contained in the telex dated March 25, 1976, the Arbitral Tribunal deducted a sum of US dollars 316,610 from the amount of US dollars 783,686.20 computed as interest at 6 per cent. and held that General Electric was entitled to a net amount of US dollars 467,076.20 by way of delinquent interest. The Arbitral Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinuing at the annual rate of 8 per cent. on the said regular interest until payment 6,347,748.50 3. Delinquent interest on late payments of principal 467,076.20 4. Compensatory damages to March 31,1986, on the above delinquent interest continuing at the annual rate of 8 per cent. on the said delinquent interest until payment 1,324,357.75 5. Spare parts 119,053.00 6. Compensatory damages to March 31,1986, on the above spare parts continuing at the annual rate of 8 per cent. on the said sum for 276,702.17 7.Towards costs of General Electric 1,549,899.00 Total 12,215,622.14 The Arbitral Tribunal has awarded interest at the annual rate of 8 per cent. on items, 1, 3 and 5. On October 15, 1986, General Electric instituted proceedings for enforcement of the award of the Arbitral Tribunal by filing Arbitration Petition No. 159 of 1986 under section 5 of the Foreign Awards Act in the Bombay High Court. On October 17, 1986, Renusagar instituted a suit (Suit No. 265 of 1986) in the Court of the Civil Judge, Mirzapur, seeking a declaration that the award made by the Arbitral Tribunal was a nullity and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory damages were excessive and unusual ; (x) the chairman of the Arbitral Tribunal was biased against Renusagar ; and (xi) the costs of arbitration were unconscionable and excessive. The learned single judge (Pendse J.) has considered all the aforesaid objections raised on behalf of Renusagar in his very comprehensive judgment dated October 21, 1988, wherein after rejecting the said objections, he has held mat the award is enforceable under the provisions of the Foreign Awards Act and on that basis a decree in terms of the award was drawn. Renusagar filed an appeal (Appeal No. 680 of 1989) under clause 15 of the Letters Patent of the Bombay High Court against the said judgment of the learned single judge which was disposed of by a Division Bench of the said High Court (C. Mookerjee C.J. and Mrs. Sujata Manohar J.) by judgment dated October 12, 1989. The learned judges of the High Court held that the said appeal was not maintainable in view of section 6(2) of the Foreign Awards Act. Learned judges, however, examined the matter on merits and found that there was no substance in the appeal. In this context, the learned judges have dealt with the objection about the arbitrators havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, on I. A. No. 1 of 1990 in Civil Appeal No. 71 of 1990 stayed the operation of the judgment and decree under appeal subject to Renusagar depositing in the original side of the Bombay High Court, the sums equivalent to one-half of the decretal amount calculated as on date and furnishing security to the satisfaction of the High Court in respect of the decretal amount. General Electric was permitted to withdraw the deposit upon furnishment of security by way of bank guarantee for the sum to be withdrawn in excess of rupees four crores to the satisfaction of the High Court. In the said order it was also directed that interest at 10 per cent. per annum would be payable by Renusagar on the balance of the decretal amount in the event of its failing in the appeal and correspondingly General Electric would be liable to pay interest at the same rate on the amount withdrawn by it in the event of the appeal succeeding. In pursuance of this order, Renusagar deposited a sum of Rs. 9,69,26,590 on March 20, 1990, which was withdrawn by GEC after furnishing the necessary bank guarantee. By another order dated November 6, 1990, on I. A. No. 3 of 1990 in Civil Appeal No. 71 of 1990, this court dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1923 which was drawn up on the initiative of the ICC under the auspices of the League of Nations. The Geneva Protocol had two objectives, first, it sought to make arbitration agreements, and arbitration clauses in particular, enforceable internationally; and, secondly, it sought to ensure that awards made pursuant to such arbitration agreements would be enforced in the territory of the State in which they were made. The Geneva Protocol of 1923 was followed by the Geneva Convention of 1927 which was also drawn up under the auspices of the League of Nations. The purpose of this Convention was to widen the scope of the Geneva Protocol of 1923 by providing recognition and enforcement of protocol awards within the territory of contracting States (not merely the State in which the award was made). (See Alen Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, second edition, pages 61-62). India was a signatory to the Protocol of 1923 and the Convention of 1927. With a view to implementing the obligations undertaken under the said Protocol and Convention, the Arbitration (Protocol and Convention) Act, 1937, was enacted. A number of problems were encountered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitration in India. Sub-section (2) prescribes that any foreign award which would be enforceable under this Act shall be treated as binding for all purposes on the persons as between whom it was made and may be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India. Section 5 makes provision for filing of foreign awards in court. In sub-section (1) it is laid down that any person interested in a foreign award may apply to any court having jurisdiction over the subject-matter of the award that the award be filed in court. Subsection (2) requires that such an application shall be in writing and shall be numbered and registered as a suit between the applicant as plaintiff and the other parties as defendants. Sub-section (3) requires the court to give notice to the parties to the arbitration other than the applicant requiring them to show cause, within a time specified why the award should not be filed. Section 6 deals with enforcement of foreign awards. Sub-section (1) lays down that where the court is satisfied that the foreign award is enforceable under the Act, the court shall order the award to be filed and shall proceed to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made ; or (b)if the court dealing with the case is satisfied that- (i)the subject-matter of the difference is not capable of settlement by arbitration under the law in India ; or (ii)the enforcement of the award will be contrary to public policy; (2) If the court before which a foreign award is sought to be relied upon is satisfied that an application for the setting aside or suspension of the award has been made to a competent authority referred to in sub-clause (v) of clause (a ) of sub-section (1), the court may, if it deems proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to furnish suitable security." The objection of Renusagar against enforceability of the award is based on (i) section 7(1)(a )(ii) of the Foreign Awards Act, on the ground that Renusagar was unable to present its case ; and (ii) section 7(1)(b)(ii ) of the Foreign Awards Act, on the ground that the enforcement of the awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )it would be contrary to the public policy of India as well as of the State of New York to award interest on interest and compounding it further and to award damages on damages ; (iv)under the contract interest was payable only up to the date of maturity of each promissory note and no interest was payable for the period subsequent of the said date and the only remedy available to General Electric in the event of default in payment of an instalment on the due date was to enforce the bank guarantee or to recall all the promissory notes (v)under the original approval dated January 2, 1964, given by the Government of India, the total amount of loan was to be repaid in sixteen semi-annual instalments between 30 and 120 months from the contract effective date and payment of interest was specifically restricted for the period from the 16th to the 30th month and thereafter upon capitalisation from the 30th month to the 120th month and no interest was payable without the Foreign Exchange Regulation Act sanction after the due date of each instalment ; (vi)no liability for interest for delayed payment of instalments would accrue in respect of the period from June 30, 1967, to August 1, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , i.e., the law of the forum. It has been urged that the law of the State of New York is the law of the contract and that the said law provides the date of breach as the date of conversion and therefore, the amount awarded in US dollars under the award of the Arbitral Tribunal must be converted into Indian currency on the basis of the rate prevalent on the date of the breach. It has been submitted that the decision of this court in Forasol v. Oil and Natural Gas Commission [1986] 60 Comp. Cas. 286, on which reliance has been placed by the Division Bench of the High Court, has no application to the present case because in that case the court was not dealing with a foreign award but was dealing with an award made under the Indian Arbitration Act, 1940. Shri Shanti Bhushan, has, on the other hand, submitted that: (i ) the scope of enquiry in proceedings under section 5 of the Foreign Awards Act is confined to questions relating to the enforcement of the award and does not comprehend a challenge to the merits and even if a question of law decided by the arbitrators is incorrect, it is not a ground of challenge under section 7 of the Foreign Awards Act ; (ii) Renusagar cannot have any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of violation of public policy in section 7(1)(b)(ii ) of the Foreign Awards Act; (ix) there is no violation of the provisions of the Foreign Exchange Regulation Act because in view of the approval that had already been granted by the Government of India to the original contract, there was no prohibition against remittance of regular interest on the instalments which had become due and payable and the refusal on the part of the Government to give approval to rescheduling of* the payment of instalments did not in any way preclude the Government of India from granting necessary permission for remittance of the interest on the unpaid instalments under section 9 of the Foreign Exchange Regulation Act ; (x) in any event, the bar of section 9 of the Foreign Exchange Regulation Act is not applicable- to the proceedings for enforcement of the award in view of section 47(3) of the Foreign Exchange Regulation Act and the enforcement of the award does not involve contravention of the provisions of the Foreign Exchange Regulation Act; (xi) the costs that have been awarded are reasonable and three copies of the supporting vouchers except for the vouchers relating to fees of Amarchand Mangalda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a)(ii ) of the Foreign Awards Act ? III.Does section 7(1)(b)( ii) of the Foreign Awards Act preclude the enforcement of the award of the Arbitral Tribunal for the reason that the said award is contrary to the public policy of the State of New York ? IV.What is meant by "public policy" in section 7(1)(b)(ii ) of the Foreign Awards Act ? V.Is the award of the Arbitral Tribunal unenforcable as contrary to public policy of India on the ground that- (a)it involves contravention of the provisions of the Foreign Exchange Regulation Act ; (b)it penalises Renusagar for acting in accordance with the interim order passed by the Delhi High Court in the writ petition filed by Renusagar challenging the withdrawal of exemption from income-tax on the interest paid to General' Electric ; (c)it results in the charging of interest on interest which is compounded and also damages on damages ; (d)it would lead to unjust enrichment for General Electric. VI.Which law would govern the rate of exchange for conversion of foreign currency in proceedings for enforcement of a foreign arbitral award ? VII.Does Forasol v. Oil and Natural Gas Commission [1986] 60 Comp. Cas. 286 (SC) need reconsideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction to make it, or it was obtained by fraud or its recognition or enforcement would be contrary to public policy or the proceedings in which it was obtained were opposed to natural justice. (See Dicey and Morris, The Conflict of Laws, 11th edition, rules 62-64, pages 558-559 and 571-572 and Cheshire and North, Private International Law, 12th edition pages 446-447). The English courts would not refuse to recognise or enforce a foreign award merely because the arbitrators (in its view) applied the wrong law to the dispute or misapplied the right law. (See Dicey and Morris, The Conflict of Laws, 11th edition, volume II, page 565). Under the Geneva Convention of 1927, in order to obtain recognition or enforcement of a foreign arbitral award, the requirements of clauses (a) to (e) of article 1 had to be fulfilled and in article 2, it was prescribed that even if the conditions laid down in article 1 were fulfilled recognition and enforcement of the award would be refused if the court was satisfied in respect of matters mentioned in clauses (a), (b) and (c ). The principles which apply to recognition and enforcement of foreign awards are in substance, similar to those adopted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted," (Redfern and Hunter, Law and Practice of International Commercial Arbitration, second edition, page 461). In our opinion, therefore, in proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961, the scope of enquiry before the court in which the award is sought to be enforced is limited to the grounds mentioned in section 7 of the Act and does not enable a party to the said proceedings to impeach the award on the merits. II. Bar to the enforcement of the award under section 7(1)( a)(ii) of the Act. As indicated earlier, the grievance of Renusagar is that the Arbitral Tribunal on October 1, 1985, decided the preliminary objection raised by Renusagar that the arbitrators had become functus officio and were not entitled to proceed with the arbitration proceedings on the merits and that the Arbitral Tribunal thereafter proceeded to deal with the merits of the claim of General Electric without any further notice to Renusagar and as a result Renusagar was unable to present its case before the Arbitral Tribunal. This objection was not raised by Renusagar either before the learned single judge or before the Division Bench of the High Court. We have, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipate in the same on the ground that the application submitted by General Electric under section 3 of the Foreign Awards Act had been rejected by the Mirzapur civil court and the said order of the court had not yet been set aside or stayed by the Allahabad High Court in the revision petition filed by General Electric. Renusagar, through their advocates (Khaitan and Partners) also sent a petition dated August 23, 1985, to the Secretary General, ICC, as well as the Secretariat, ICC of Arbitration, reiterating their objection that the arbitrators had become functus officio and could not proceed and/or function. In his communication to Khaitan and Partners dated September 2,1985, the Chairman of the Arbitral Tribunal intimated that the question as to the effect of the suit filed in the Mirzapur court on the arbitration would be considered as a preliminary issue at the scheduled meeting on October 1, 1985. On September 23, 1985, Khaitan and Partners, on behalf of Renusagar, addressed a communication to Mr. Roberto Power in the ICC (copies of the same were sent to the arbitrators as well as to General Electric) wherein it was stated : "Our plea is totally different. It is that the arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be refused if the competent authority in the country where recognition and enforcement is sought finds that the recognition or enforcement of the award would be contrary to the public policy of that country, i.e., the country where the award is sought to be enforced, a departure has been made in section 7(1)(b)( ii) of the Foreign Awards Act which prescribes that the foreign award may not be enforced under the said Act if the court dealing with the case is satisfied that the enforcement of the award would be contrary to public policy. The submission of Shri Venugopal is that in section 7(1)(b)( ii) of the Act, Parliament has deliberately refrained from using the words "public policy of India" which implies that the words "public policy" are not restricted to the public policy of India but would cover the public policy of the country whose law governs the contract of the country of the place of arbitration and the enforcement of an award would be refused if it is contrary to such public policy. In this context, Shri Venugopal has invited our attention to the provisions of section 7(1) of the Arbitration (Protocol and Convention) Act, 1937, wherein the words used are "and enforcemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to the principles of the law of the country in which it is sought to be relied upon. Enlarging the field of enquiry to include public policy of the courts whose law governs the contract or of the country of place of arbitration, would run counter to the expressed intent of the legislation. With regard to the provisions of the Arbitration (Protocol and Convention) Act, 1937, it may be stated that section 7(1) of the said Act, as originally enacted, read as under: "7. Conditions for enforcement of foreign awards.-(1) In order that a foreign award may be enforceable under this Act it must have- (a)been made in pursuance of an agreement for arbitration which was valid under the law by which it was governed, (b)been made by the tribunal provided for in the agreement or constituted in the manner agreed upon by the parties, (c)been made in conformity with the law governing the arbitration procedure, (d)become final in the country in which it was made, (e)been in respect of a matter which may lawfully be referred to arbitration under the law of British India. and the enforcement thereof must not be contrary to the public policy of the law of British India. (2) A foreign a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f enquiry by excluding contravention of law of the court in which the award is sought to be enforced as a ground for refusing recognition and enforcement of a foreign award. The words "law of India" have, therefore, been omitted in section 7(1)(b)(ii ) of the Foreign Awards Act. It cannot, therefore, be said that by using the words "public policy" only, section 7(1)(b)( ii) of the Foreign Awards Act seeks to make a departure from the provisions contained in the Protocol and Convention Act, 1937, and, by using the words "public policy" without any qualification, Parliament intended to broaden the scope of enquiry so as to cover public policy of other countries, i.e., the country whose law governs the contract or the country of the place of arbitration. In the UK, the Arbitration Act, 1975, has been enacted to give effect to the provisions of the New York Convention. Section 5(3) of the said Act provides as under : "Enforcement of a convention award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to enforce the award." Although the words "public policy" only are used without in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew". According to the narrow view courts cannot create new heads of public policy whereas the broad view countenances judicial law making in this area. (See Chitty on Contracts, 26th edition, volume I, para 1133, pages 685-686). Similar is the trend of the decision in India. In Gherulal Parakh v. Mahadeodas Maiya [1959] Suppl 2 SCR 406, 440 ; AIR 1959 SC 781, 795, this court favoured the narrow view when it said : "... though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interest of stability of society not to make any attempt to discover new heads in these days". In later decisions this court has, however, leaned towards the broad view (see Murlidhar Agarwal v. State of U.P. [1975] 1 SCR 575, at page 584 ; Central Inland Water Transport Corporation v. Brojo Nath Ganguly [1986] 60 Comp. Cas. 797, 860 ; [1986] 2 SCR 278 at page 373; Rattan Chand Hira Chand v. Askar Nawaz Jung [1991] 3 SCC 67, at pages 76-77). In the field of private international law, courts refuse to apply a rule of foreign law or recognise a foreign judgment or a foreign arbitral award if i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licy that the defendant invokes may be of this overriding nature and therefore enforceable in all actions, or it may be local in the sense that it represents some feature of internal policy. If so it must be confined to cases governed by the domestic law and it should not be extended to a case governed by foreign law. In order to ascertain whether the rule is all-pervading or merely local, it must be examined in the light of its history, the purpose of its adoption, the object to be accomplished by it and the local conditions. (See Cheshire and North Private International Law, 12th edition, page 129). The cases in which the English courts refuse to enforce a foreign acquired right on the ground that its enforcement would affront some moral principle the maintenance of which admits of no possible compromise, have been classified as under- "(i)Where the fundamental conceptions of English justice are disregarded ; (ii)Where the English conceptions of morality are infringed ; (iii)Where a transaction prejudices the interests of the United Kingdom or its good relations with foreign powers ; (iv)Where a foreign law or status offends the English conceptions of human liberty and freed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public policy in its application to recognition and enforcement of foreign arbitral awards under the New York Convention is reflected in the decision of the US Court of Appeals in Parsons and Whittemore Overseas Co. Inc. v. Societe Generate de l'Industrie du Papier (Rakta ) and Bank of America [1974] 508 F. 2d 969, wherein it has been observed (at pages 973-74) : "The general pro-enforcement bias informing the Convention and explaining its supersession of the Geneva Convention points toward a narrow reading of the public policy defense. An expansive construction of this defense would vitiate the Convention's basic effort to remove preexisting obstacles to enforcement. We conclude, therefore, that the convention's public policy defense should be construed narrowly. Enforcement of foreign arbitral awards may be denied on this basis only where enforcement would violate the forum state's most basic notions of morality and justice". While dealing with arbitration agreements in international business transactions, the US Supreme Court, has disapproved a parochial refusal by the courts of one country to enforce an international arbitration agreement as well as the "parochial concept t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(1)(b)( ii) of the Foreign Awards Act means the doctrine of public policy as applied by the courts in India. This raises the question whether the narrower concept of public policy as applicable in the field of public international law should be applied or the wider concept of public policy as applicable in the field of municipal law. Keeping in view the object underlying the enactment of the Foreign Awards Act, this court has also favoured a liberal construction of the provisions of the said Act. In Renusagar case I [1985] 1 SCR 432, 492 ; AIR 1985 SC 1156, 1181, it has been observed : "It is obvious that since the Act is calculated and designed to subserve the cause of facilitating international trade and promotion thereof by providing for speedy settlement of disputes arising in such trade through arbitration, any expression or phrase occurring therein should receive, consistent with its literal and grammatical sense, a liberal construction". This would imply that the defence of public policy which is permissible under section 7(1)(b)( ii) should be construed narrowly. In this context, it would also be of relevance to mention that under article I(e) of the Geneva Convention A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V. Is the award contrary to public policy of India ? Having examined the scope of public policy under section 7(1)(b )(ii) of the Foreign Awards Act, we will now proceed to consider the various grounds on the basis of which the said provision is invoked by Renusagar to bar the enforcement of the award of the Arbitral Tribunal. As indicated earlier, Renusagar has invoked the said provision on the ground that enforcement of the award would be contrary to the public policy for the reason that such enforcement, (a)would involve contravention of the provisions of the Foreign Exchange Regulation Act; (b)would amount to penalising Renusagar for not disregarding the interim orders passed by the Delhi High Court in the writ petition filed by Renusagar ; (c)would enable recovery of compound interest on interest ; (d)would result in payment of damages on damages ; (e)would result in unjust enrichment by General Electric ; We will examine the submissions of learned counsel under each head separately. (a) Violation of Foreign Exchange Regulation Act-As mentioned in the preamble, the Foreign Exchange Regulation Act is a law regulating certain payments, dealings in foreign exchange and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant statute or statutory instrument is applicable to the contract. Provided that foreign exchange legislation will not be applied if it is used not with the object of protecting the economy of the foreign State, but as an instrument of oppression or discrimination." (See Dicey and Morris, The Conflict of Laws, 11th edition, volume II, page 1466) In the comments on the said rule, it is stated : "An English court would clearly refuse to enforce a contract the making or performance of which was prohibited by the Exchange Control Act, 1947 (now suspended), or by any statutory instrument made in virtue of that Act, or which was prohibited by earlier United Kingdom exchange control legislation. This would apply irrespective of the proper law of the contract and irrespective of the place of performance. The question whether the Act or statutory instrument applied to the transaction would have to be answered by construing it in accordance with the principles of statutory interpretation which are part of English law. If it did so apply, it would be an example of an 'overriding statute'. (See Dicey and Morris, The Conflict of Laws, 11th edition, volume II, page 1469) In support of this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the defendant pleaded that it was unlawful for him under Italian law to enter into any of the contacts which were "exchange contracts" within the meaning of article VIII, section 2(b) of the Bretton Woods Agreement and unenforceable by reason of the Bretton Woods Agreements Order in Council, 1946. The said plea of the defendant was rejected by the trial judge who gave judgment in favour of the plaintiffs and the said judgment was affirmed by the Court of Appeal. It appears that the judgment of the English court was sought to be enforced by the plaintiffs in Italy but the Italian courts refused to recognise and enforce the said judgment on the view that since the contracts were entered into in violation of the Italian Exchange Control Regulations their enforcement would amount to infringement of Italian public policy and the contracts were unenforceable in Italy (See Mauro Rubino-Sammartano, Public Policy in Transnational Relationships, page 91). Our attention has also been invited to a decision of the Supreme Court of Austria dated May 11,1983, which is extracted, in brief, in Yearbook of Commercial Arbitration, volume X (1985), pages 421 to 423. In that case, an award had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Ltd. [1986] Supp. 3 SCR 909, at page 981 ; [1986], 59 Comp. Cas. 548 and M. G. Wagh v. Jay Engineering Works Ltd. [1987] 62 Comp. Cas. 658, 662; [1987] 1 SCR 981, at page 987]. Keeping in view the aforesaid objects underlying the Foreign Exchange Regulation Act and the principles governing enforcement of exchange control laws followed in other countries, we are of the view that the provisions contained in the Foreign Exchange Regulation Act have been enacted to safeguard the economic interest of India and any violation of the said provisions would be contrary to the public policy of India as envisaged in section 7(1)(b)( ii) of the Act. The submissions urged by Shri Venugopal to show that there has been a violation of the provisions of the Foreign Exchange Regulation Act, therefore, need examination. Shri Venugopal has made a two-fold submission in this regard. In the first place, he has urged that in awarding delinquent interest, under item No. 3 the Arbitral Tribunal has acted in disregard of the provisions of the Foreign Exchange Regulation Act and secondly the enforcement of the award of the Arbitral Tribunal would result in violation of the provisions of the Foreign Excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tands concluded by the decision in Renusagar case I wherein it has been observed (at page 457) : "In July, 1969, Renusagar sought the Central Government's approval to the rescheduling of the dates of payment as embodied in the October, 1968 amendment as also in the memorandum of the meeting held in December, 1968, but by letters dated August 1, 1969, and August 4, 1969, the Central Government declined to approve the rescheduling of the dates of payment on the ground that it would result in larger outflow of foreign exchange and advised Renusagar to effect payments as per the original schedule including instalments which had since fallen due. The result was that the original schedule of payment remained operative and there was delay on the part of the Renusagar to make payment of certain instalments on due dates." From the observations aforementioned in Renusagar case I, it is apparent that the original contract postulates payment of interest till payment and the effect of the order of the Government of India dated August 1, 1969, was that the original schedule of payment remained operative. Since the original contract had been approved by the Government of India, it cannot be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion, shall prevent legal proceedings being brought in India to recover any sum which, apart from said provisions and any such term, would be, due, whether as debt, damages or otherwise, but- (a)the said provisions shall apply to sums required to be paid by any judgment or order of any court as they apply in relation to other sums ; (b)no steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as the Central Government or the Reserve Bank, as the case may be, may permit to be paid ; and (c)for the purpose of considering whether or not to grant such permission, the Central Government or the Reserve Bank, as the case maybe, may require the person entitled to the benefit of the judgment or order and the debtor under the judgment or order, to produce such documents and to give such information as may be specified in there requisition." In Dhanrajamal Gobindram v. Shamji Kalidas and Co. [1961] 3 SCR 1020, 1031 ; AIR 1961 SC 1285, 1290, this court has construed the provisions of section 21 of the Foreign Exchange Regulation Act, 1947. Subsection (3) of section 21 of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that merely because the Government of India had refused to give its approval to rescheduling of payment of instalments it would not grant permission under section 47(3) of the Foreign Exchange Regulation Act, to the enforcement of the judgment that may be passed in these proceedings. It has also been urged that section 47(3) of the Foreign Exchange Regulation Act, is applicable where the legal proceedings are brought in India to recover a sum which is "due", i.e., as liquidated sum presently owing and the said provision would not apply to an obligation to pay on a future date. We do not find any support for this submission from the language of section 47(3) of the Foreign Exchange Regulation Act, wherein the words used are "to recover any sum which, apart from the said provisions and any such term, would be due, whether as debt, damages or otherwise". The words "would be" which precede the word "due" indicate that the quantum of the amount has to be fixed in the legal proceedings and that it need not be a predetermined amount. Moreover in the present case, we are concerned with proceedings for the enforcement of an award wherein the amount due has already been determined by the Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file his could by March 24, 1970." The matter came before the court after notice on May 18, 1970, on which date the following order was passed : "Mr. Ravinder Narain states that he will give security of the assets of the company to the satisfaction of the Commissioner of Income-tax, Lucknow, for Rs. 4 lakhs. Let this be done within a month from today. Interim injunction and stay to continue. In default of compliance, as above, petition for stay will stand dismissed." From the prayer contained in C. M. 286-W and the orders dated February 24, 1970, and May 18, 1970, passed on the said application, it would appear that pending the hearing and final disposal of the writ petition, there was an interim injunction restraining the Union of India, the respondent in the said writ petition, and its officers, servants and agents from taking any steps on proceedings in enforcement, furtherance pursuance or implementation or in any manner giving effect to the said orders dated September 11, 1969, whereby tax exemption had been withdrawn and also restraining from preventing Renusagar from paying tax on interest of 6 per cent. per annum to General Electric in accordance with the approval grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic policy of other countries e.g., country of the law of contract of the courts of the place of arbitration cannot be taken into consideration. For that reason an objection to the enforceability of the award of the Arbitration Tribunal cannot be entertained on the ground it is contrary to the public policy of the State of New York. We would, however, examine whether award of interest on interest or compound interest is contrary to public policy of India. Before we refer to the law in India in this regard, we may take, note of the law in England to which reference has been made by Shri Venugopal during the course of his submissions. At common law in England the principle that is applied is that laid down in "the reluctant decision", of the House of Lords in London, Chatham and Dover Rail Co. v. South-Eastern Rail Co. [1893] AC 429 (HL), that in the absence of any agreement or statutory provision for the payment of interest, a court has no power to award interest, simple or compound, by way of damages for the detention, (i.e., the late payment) of a debt. The injustice resulting from this rule has been sought to be removed by legislative intervention. By section 3 of the Law Reform ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved of the use of the money so paid away or withheld". They upheld the decision of the full court of South Australia awarding damages for the added cost of funding the business with borrowed money as a result of the loss of the use of money overpaid in tax by awarding compound interest for the reason that simple interest would not reflect accurately the extent of the respondent's loss since simple interest almost under compensates the injured party's true loss. It was observed (at page 218) : "The disdain of the common law for interest especially compound interest, is a relic from the days when interest was regarded as necessarily usurious." Brennan and Deane JJ. have expressed their general agreement with the reasons given by Mason C.J. and Wilson J. but Dawson J. has given a dissenting judgment. It appears that in Canada also, the Canadian Federal Court of Appeal has expressed the view that there is no longer any reason to retain the common law rule against interest as damages and the said rule has been described as "a judge-made limitation on the awarding of interest which is clearly no longer seen to be good public policy" (see Alqonquin Mercantile Corporation v. Dart Indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause in section 3(3)(c) of the Interest Act, 1978, the court is precluded from awarding interest on interest does not mean that it is not permissible to award such interest under a contract or usage or under the statute. It is common knowledge that provision is made for the payment of compound interest in contracts for loans advanced by banks and financial institutions and the said contracts are enforced by courts. Hence, it cannot be said that award of interest on interest, i.e., compound interest, is against the public policy of India. We are, therefore, unable to accept the contention that award of interest on interest, i.e., compound interest, is contrary to public policy of India and the award in respect of compensatory damages awarded under items Nos. 2, 4 and 6 cannot be enforced under section 7(1)(b)( ii) of the Act. (d) Damages on damages.-This objection relates to award of compensatory damages under item No. 4. The submission of Shri Venugopal is that since the contract did not provide for payment of interest for the period subsequent to the date of maturity, the delinquent interest that has been awarded under item No. 3 is in the nature of damages and the award of compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has a bearing on the award of delinquent interest under item No. 3, as well as on the award of compensatory damages under items Nos. 2 and 4 and award of costs under item No. 7. In the case decided by the Romanian Supreme Court, a Lebanese shipowner had agreed by a charter party with the Romanian State enterprise to transport from Costantza (Romania) to Bandar Abbas (Iran) certain goods which had been sold C & F to an Iranian buyer. The voyage was interrupted at Tripoli (Lebanon) where the shipowner had its seat. At Tripoli all merchandise disappeared, according to the shipowner because of war, and according to the Romanian enterprise because of a local fraudulent sale. The dispute was referred to arbitration and in the arbitration award, the shipowner was directed to refund to the Romanian enterprise part of the freight it had received as well as the value of the lost goods. The Romanian enterprise sought enforcement of the arbitration award in Romania. The Lebanese shipowner objected to the request on various grounds including the ground that it was not obliged to refund the value of the goods since they had been fully paid for by the Iranian buyer. It was submitted that the enf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without primary reference to it." In Indian law the principle of unjust enrichment finds recognition in the Indian Contract Act, 1872 (sections 70 and 72). We do not consider it necessary to go into the question whether the principle of unjust enrichment is a part of the public policy of India since we are of the opinion that even if it be assumed that unjust enrichment is contrary to public policy of India, Renusagar cannot succeed because the unjust enrichment must relate to the enforcement of the award and not to its merits in view of the limited scope of enquiry in proceedings for the enforcement of a foreign award under the Foreign Awards Act. The objections raised by Renusagar based on unjust enrichment do not relate to the enforcement of the award because it is not the case of Renusagar that General Electric has already received the amount awarded under the arbitration award and is seeking to obtain enforcement of the award to obtain further payment and would thus be unjustly enriching itself. The objections about unjust enrichment raised by Renusagar go to the merits of the award, that is, with regard to the quantum awarded by the Arbitral Tribunal under items Nos. 2, 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nited for both the actual and the trebled damages, to diminish the actual damages by the amount of the taxes that it would have paid had it received greater profits in the years it was damaged would be to apply a double deduction for taxation, leaving Hanover with less income than it would have had if United had not injured it." Since General Electric would be liable to pay U. S. tax on the amount of compensatory damages awarded under items Nos. 2 and 4 of the award, it cannot be said that there would be unjust enrichment by General Electric on account of non-deduction of US tax payable on the amount of regular interest and delinquent interest while assessing compensatory damages under items Nos. 2 and 4. As regards the amount of delinquent interest awarded under item No. 3, it has been submitted that since interest is not payable under the contract in respect of the period subsequent to the date of maturity of the promissory notes, the award of delinquent interest for the said period would result in unjust enrichment. This argument about liability for such interest has already been, considered by us and we have found that under the contract interest is payable for the period sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om foreign currency to Indian currency. In the field of conflict of laws money serves a two-fold function, viz., (i) of a means of measurement ; and (ii) of a medium of payment. The currency in which a debt is expressed or a liability to pay damages is calculated is called the "money of account" or "money of contract" or "money of measurement" and the currency in which the said debt or liability is to be discharged is called the "money of payment". The money of account is to be ascertained from the terms of the contract construed in accordance with the proper law of the contract and the money of payment is determined by the law of the country in which such debt or liability is payable, i.e., lex loci solutionis. (See Dicey and Morris, The Conflict of Laws, 11th edition, volume 2, rules 209 and 210). Where the money of account and the money of payment are not identical the amount of units of the currency of account owed by the debtor must, by an exchange operation, be translated into the currency in which he is obliged to pay. This is a matter of substance and the rate of exchange for such conversion is determined by the proper law of the contract or the law governing the liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the payment of an amount expressed in foreign currency and the amount of any foreign currency had to be converted in sterling on or before the date of judgment and the date for the purpose of such conversion was the date when the cause of action arose. This was the law laid down by the House of Lords in United Railways of Havana and Regla Warehouses Ltd., In re [1960] 2 All ER 332 ; [1961] AC 1007. This decision was overruled by the House of Lords (by majority) in 1975 in Miliangos v. George Frank (Textiles ) Ltd. [1975] 3 All ER 801 ; [1976] AC 443. In that case, a Swiss seller had agreed to supply English buyers with goods at a price expressed in the contract in Swiss francs. The goods and invoices were delivered but the price was not paid and bills of exchange drawn in Switzerland and accepted by the buyers were dishonoured on presentation. The seller brought an action in England wherein he claimed the sums due in Swiss francs. Originally he had asked for conversion of Swiss francs into sterling at the breach date in view of the law laid down in United Railways of Havana and Regla Warehouses Ltd.'s case (supra), but subsequently in view of the decision of the Court of Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years latter, in having his views accepted by the House of Lords. Subsequently in Owners of the M V Eleftherotria v. Owners of the M V Despina R [1979] AC 685 ; [1979] 1 All ER 421, the House of Lords has extended the rule laid down in Miliangos v. George Frank (Textiles) Ltd. [1975] 3 All ER 801 to claims for damages for tort and breach of contract. The rule laid down in Miliangos v. George Frank (Textiles ) Ltd. [1975] 3 All ER 801 (HL) has been held to be applicable to an action at common law on a foreign judgment (see Dicey and Morris, The Conflict of Laws, 11th edition, volume 2, page 1461). In relation to arbitral awards, the matter had come up before the Court of Appeal in Jugoslavensha Oceanska-Plovidba v. Castle Investment Co. Inc. [1974] QB 292 wherein it was held that an award could be made by arbitrators in England in terms of US dollar and that the same could be enforced by converting the foreign currency into sterling at the rate prevailing on the date of the award. While referring to the said decision, Lord Wilberforce, in Miliangos v. George Frank (Textiles) ltd. [1975] 3 All ER 801, 814 ; [1976] AC 443, 469 (HL) has said : "In the case of arbitration, there may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of foreign money due there), the damages, being measured in dollars, are to be converted at the rate of exchange of the date of breach or wrong". (See Mann, Legal Aspects of Money, 5th edition, page 347). According to the learned author, the first part of the above statement is based on the decision of the US Supreme Court in Deutsche Bank Filiale Nurenberg v. Humphrey [1926] 272 US 517 and the latter part of the statement is supported by the decision of the US Supreme Court in Hicks v. Guiness [1925] 271 US 711. Most of the States, including the State of New York (till recently), follow the old English rule and apply the rate of exchange prevailing at the date of breach. In the State of New York, however, there has been a departure in some cases where the judgment-date rule has been applied. See John S. Metcaif Co. v. Mayer [1925] 211 N. Y. Supp. 53 and Sirie v. Godfrey [1921] 188 N. Y. Supp. 52). Even in the matter of application of the breach date rule in actions for enforcement of a foreign judgment, the New York courts have applied the breach date rule with effect from the date of the judgment sought to be enforced. In Indag v. Irrideko Corporation [1987] 658 F. Supp. 76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the request of the New York State Bar Association and the Erie County Bar Association and it was supported by the Association of the for of the City of New York. According to the chairman of the Committee on International Trade and Transactions of the New York State Bar Association the said amendment was necessary because in view of the decision of the House of Lords in Miliangos' case (supra) "a number of transactions which would otherwise be governed by New York law, and, involve professional and financial advisors in New York, have been structured in England and covered by English law". In India, the law relating to conversion of foreign currency into Indian currency in the matter of enforcement of judgments or awards is governed by the decision of this court in Forasol's case (supra). That case arose out of a contract between Forasol, a foreign company and the Oil and Natural Gas Commission, a Government of India undertaking. Certain disputes arose between the parties which were referred to arbitration in accordance with the arbitration clause contained in the contract. The said arbitration was governed by the Indian Arbitration Act, 1940. The award directed certain payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals or other proceedings against it in superior courts and by the time the matter is finally determined, the rate of exchange prevailing on that date may be nowhere near that which prevailed at the date of the decree of the trial court, it was observed that this difficulty is easily overcome by selecting the date when the action is finally disposed of, in the sense that the decree becomes final and binding between the parties after all remedies against it are exhausted. As regards the fourth date, i.e., the date when the court orders execution to issue, it was felt that execution of a decree is not a simple matter because it involves execution of a money decree and the judgment-debtor's property has to be attached and pending attachment a third party, at times set up by the judgment-debtor, may prefer a claim to the attached property which will have to be investigated and determined by the executing court and even where no claim is preferred the attached property cannot be brought to sale immediately and certain formalities have to be complied with and even after the sale has taken place, the judgment-debtor may further hold up the receipt of the sale proceeds by the decree-hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy amount due to him into Indian rupees. He can do so either at the rate of exchange prevailing on the date when the amount became payable for he was entitled to receive the amount on that date or, at his option, at the rate of exchange prevailing on the date of the filing of the suit because that is the date on which he is seeking the assistance of the court for recovering the amount due to him. In either event, the valuation of the suit for the purposes of court-fees and the pecuniary limit of the jurisdiction of the court will be the amount in Indian currency claimed in the suit. The plaintiff may, however, choose the second course open to him and claim in foreign currency the amount due to him. In such a suit, the proper prayer for the plaintiff to make in his plaint would be for a decree that the defendant 6 pay to him the foreign currency sum claimed in the plaint subject to the permission of the concerned authorities under the Foreign Exchange Regulation Act, 1973, being granted and that in the event of the foreign exchange authorities not granting the requisite permission or the defendant not wanting to make payment in foreign currency even though such permission has been g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt hearing the application in the other proceedings challenging the decree should follow the same procedure as the trial court for the purpose of ascertaining the rate of exchange prevailing on the date of its appellate decree or of its order on such application or on the date nearest or most nearly preceding the date of such decree or order. If such rate of exchange is different from the rate in the decree which has been challenged, the court should make the necessary modification with respect to the rate of exchange by its appellate decree or final order. In all such cases, execution can only issue for the rupee equivalent specified in the decree, appellate decree or final order, as the case may be. These questions, of course, would not arise if pending appeal or other proceedings adopted by the defendant the decree has been executed or the money thereunder received by the plaintiff." Referring to arbitrations, this court has held that, on principle, there can be and should be no difference between an award made by arbitrators or an umpire and a decree of a court and has observed (at pages 589-90 of [1984] 1 SCR ; page 337 of 60 Comp Cas): "In the type of cases we are concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It appears that both the parties are not satisfied with said view of the Division Bench of the High Court in applying the decision in Forasol's case (supra) to the present case. Shri Venugopal has urged that in Forasol's case (supra) this court was dealing with the enforcement of an award governed by the Indian Arbitration Act and that the principles laid down in the said decision cannot be applied to the present case arising out of a foreign award which is not governed by the provisions of the Indian Arbitration Act but is governed by the provisions of the Foreign Awards Act. It is no doubt true that in the Forasol's case (supra) this court was dealing with an award governed by the Indian Arbitration Act but that does not affect the applicability of the said decision to proceedings for enforcement of a foreign award in Indian courts because the matter of conversion of foreign currency into Indian currency at the stage of enforcement of an award is governed by the same principle irrespective of the fact whether the award is governed by the Indian Arbitration Act or a foreign award governed by the Foreign Awards Act. Moreover the position has been made clear by section 4(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en placed by Shri Venugopal reads thus (at pages 326-27): "This situation involves two distinct questions : which is the legal system that determines whether there exists a right or a duty to convert the money of account into the (local) money of payment ? which is the legal system that governs the mechanics of the conversion (the type of the rate of exchange to be employed, the date and the place with reference to which the rate is to be ascertained) ? As regards the first point it is necessary to repeat that, except in unusual circumstances, the creditor suffers no prejudice from payment in the moneta loci solutionis. It is suggested, therefore, that in general, i.e., where no problem of construction arises, the question of the right or duty of conversion may be treated as one relating to the mode of performance and, consequently, subject to the lex loci solutionis. The decision on the second point, however, is liable to encroach severely upon the substance of the obligation : whether the creditor who is entitled to be paid 1,000 Spanish pesetas in Gibraltar must accept the pound equivalent calculated at the rate of peseta notes or of cable transfers to Madrid, or calculated wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitration may be expressed and enforced in foreign currency and a foreign award or judgment so expressed may be enforced like the English award or judgment." The entire position has been thus summed up by Dr. Mann (at page 436) : "As regards the date with reference to which the rate of exchange is to be ascertained, the law is to a large extent settled. In connection with conversion for the purpose of proceedings the payment-date rule is firmly established. Outside proceedings the date depends on the construction of the contract, but there exists a strong tendency to apply the payment-date rule". The same is the position with regard to the passage at page 1454 of The Conflict of Laws by Dicey and Morris, 11th edition, volume II, which reads thus (at page 1454) : "The quantum of the money tokens to be tendered is, however, always a matter of substance and not a question of the manner of performance. Hence it should always be governed by the proper law, irrespective of the place of payment". The said passage falls under rule 210 relating to discharge of foreign currency obligations which is in the following terms : "210. Irrespective of the currency in which a debt is express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nversion is that prevailing on the date of payment as held by the House of Lords in Miliangos' case (supra) . According to Shri Shanti Bhushan, the practical and procedural difficulties pointed out by this court for rejecting the date of payment rule are not of much significance so as to render the said rule inapplicable. Shri Shanti Bhushan has also relied on the following passage from The Conflict of Laws by Dicey and Morris, 11th edition, volume II, page 1454 : "If a debt or other liability expressed in a foreign currency is payable in England, the debtor may tender pounds in discharge. This is 'primarily a rule of construction' which was 'understandable at a time when foreign exchange was freely obtainable'. Where this is not the case, the rule may defeat the intention of the parties, and it may therefore 'require reconsideration. Despite a number of dicta to the contrary, the debtor may also discharge his liability by tendering the foreign currency in specie, but the creditor cannot compel him to do so. The rate of exchange to be applied is that of the day when the debt is paid." These observations have been made in comment under rule 210 and, as pointed out earlier, the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of proceedings in a court till the passing of the decree ; and (v)period subsequent to the decree till payment. The interest in respect of the period covered by item (i ), namely, prior to the date of reference to arbitration would be governed by the proper law of the contract and the interest covered by items (ii) and (iii), i.e. , during the pendency of the arbitral proceedings and subsequent to the award till the date of institution of the proceedings in the court for the enforcement of the award would be governed by the law governing the arbitral proceedings. These are matters which have to be dealt with by the arbitrators in the award and the award in relation to these matters cannot be questioned at the stage of enforcement of the award. At that stage, the court is only required to deal with interest covered by items (iv) and (v). The award of interest in respect of these periods would be governed by lexfori, i.e., the law of the forum where the award is sought to be enforced. According to Alen Redfern and Martin Hunter, "once an arbitral award is enforced in a particular country as a judgment of a court, the arbitral post-award interest rate may be overtaken by the rate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either by the learned single judge or by the Division Bench of the High Court. Taking into consideration, the facts and circumstances of the case we are not inclined to interfere with that part of the judgment of the High Court and to award interest for the period the proceedings for enforcement of the award were pending in the Bombay High Court and in this court. Shri Shanti Bhushan has, however, placed reliance on the interim order passed by this court on February 21,1990, whereby this court stayed the operation of decree and order under appeal subject to Renusagar depositing the sum equivalent to one half of the decretal amount calculated as on date and furnishing security to the satisfaction of the High Court in respect of the balance of the decretal amount and further directed that interest in respect of the rest of the one half of the decretal amount which was not recoverable by General Electric by virtue of the said order would be at 10 per cent. per annum calculated from this day on the entirety of the balance irrespective of the terms as to the rate and mode of calculation of interest granted in or permitted by the decree under appeal. Shri Shanti Bhushan has urged that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the orders of this court dated February 21,1990, Renusagar deposited a sum of Rs. 9,69,26,590 on March 20, 1990, and a further amount of Rs. 1,00,00,000 was deposited by Renusagar in pursuance of the order dated November 6, 1990, on December 3, 1990. These amounts have been withdrawn by General Electric. The question is how and at what rate the said amount should be adjusted against the decretal amount. It is not disputed that on the date when the said deposits were made by Renusagar and were withdrawn by General Electric, the rupee dollar exchange rate was Rs. 17 per dollar. Shri Shanti Bhushan has, however, submitted that although General Electric had withdrawn the amount deposited by Renusagar, it was not able to use the same because the Reserve Bank of India did not grant permission to General Electric to remit the amount by converting the same into US dollars on account of the pendency of these appeals in this court. In this regard, Shri Shanti Bhushan has placed before us copies of the letters dated April 30, 1990, June 25, 1990, September 10, 1990, and November 29, 1990, of the Reserve Bank of India. On the basis of the said letters, Shri Shanti Bhushan has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount payable by Renusagar under the decree in terms of US dollars is: Amount awarded by the Arbitral Tribunal 12,215,622.14 Interest on US $2,716,914.72 (the total amount awarded under items Nos. 1, 3 and 5) at %per annum from 1-4-86 to 15-10-1986 interms of the award 117,735.00 12,333,355.14 Less : Amount paid by Renusagar in pursuance of the orders dated 21-2-1990 and 6-11-1990during the pendency of the appeals in this court 6,289,800.00 6,043,555.14 In accordance with the decision in Forasol's case [1986] 60 Comp. Cas. 286 (SC), the said amount has to be converted into Indian rupees on the basis of the rupee dollar exchange rate prevailing at the time of this judgment. As per information supplied by the Reserve Bank of India, the rupee dollar exchange (selling) rate as on October 6, 1993, was Rs. 31.53 per dollar. At this stage it may be mentioned that after the arguments were concluded and judgment had been reserved, an application [I. A. No. 9 of 1993 in C. A. Nos. 71 and 71A of 1990] was filed on behalf of Hindalco Industries Ltd., for amendment of the cause title to substitute the applicant as appellant in C. A. No. 71 of 1990 in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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