9911796707
TMI Blog1993 (10) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 are dismissed and the decree passed by the High Court is affirmed with the direction that in terms of the award an amount of US $ 12,333,355.14 is payable by Renusagar to General Electric out of which a sum of US $ 6,289,800 has already been paid by Renusagar in discharge of the decretal amount and the balance amount payable by Renusagar under the decree is US $ 6,043,555.14 which amount on conversion in Indian rupees at the rupee dollar exchange rate of ₹ 31.53 per dollar prevalent at the time of this judgment comes to ₹ 19,05,53,293.56. Renusagar will be liable to pay future interest at 18 per cent. on this amount of ₹ 19,05,53,293.56 from fine date of this judgment till payment. The parties are left to bear their own costs. - CIVIL APPEAL NOS. 71 AND 71A OF 1990 AND C. A. NO. 379 OF 1992 - - - Dated:- 7-10-1993 - M.N. VENKATACHALIAH, S.C. AGRAWAL AND DR. A.S. ANAND, JJ. K.K. Venugopal, Dr. A.M. Singhvi, P. Tripathi, C. Mukhopadhaya, S. Rizvi, Vivek Sibal, U.K. Khaitan, K.N. Srivastava and P.K. Bansal for the Appellant. Shanti Bhushan, Soli Dastur, K.J. John, C. Mohan Rao, Ms. Bapsy F. Dastur and Thomas Joseph for the Respondent. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the contract effective date (US dollars 900,558.75) totalling US dollars 12,776,058.75 was to be paid in 16 equal six-monthly instalments commencing from the date of the expiry of 30 months from the contract effective date, and the last instalment was payable on the date of expiry of 120 months from the contract effective date (article III). Since the contract effective date was December 31, 1964, the first instalment was payable on June 30, 1967, and the last, i.e. , 16th instalment, was payable on December 31, 1974. In the contract, it was also provided that Renusagar would execute unconditional negotiable promissory notes in four series (A-B-C-D) in respect of the 16 instalments (article III(A)31( a )) and that the notes shall be prepared substantially in the form shown in the attached exhibit 'B' entitled "promissory note" and shall bear interest, at the rate of 6 per cent. per annum on the outstanding principal balance commencing from 30 months after contract effective date (article III(A)3( a )). A provision was also made that the payment of the full amount of each note shall be unconditionally guaranteed by the United Commercial Bank or other mutually acceptable bank (ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Delhi High Court on February 24, 1970, wherein it challenged the above order of the Government of India dated September 11, 1969, relating to cancellation or revocation of the tax exemption. In the said writ petition, the Delhi High Court on February 24, 1970, passed an ad interim order restraining the Government of India and its officers from enforcing or implementing the said order dated September 11, 1969. The said order was continued by order dated May 18, 1970, subject to Renusagar furnishing security for Rs. 4 lakhs to the satisfaction of the Commissioner of Income-tax, Lucknow. Renusagar furnished the necessary security and as a result, the operation of the order dated September 11, 1969, was suspended. Renusagar, however, did not remit the amount of interest calculated at 6 per cent. per annum payable to General Electric in terms of the contract. Renusagar only remitted 27 per cent. of the amount of interest calculated at 6 per cent. per annum and it did not deposit the balance amount of 73 per cent., by way of tax with the Government but retained the same with themselves. It, however, sent letters to General Electric to the effect that it had deducted the said amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on December 30, 1968, and June 30,1969, with accrued interest would be deferred for payment with the result that there would be no payment on December 31, 1968, and June 30, 1969, both of interest and principal and that the interest accrued up to December 31,1968, and to accrue up to June 30,1969, on the outstanding balance due would be calculated at the rate provided for in the contract and capitalised and that the entire sum, namely, the principal and interest to be so capitalised would be recast in 13 notes, the first of which would be payable on December. 31, 1969, and the last on December 31, 1975. As a result of these discussions and settlement, instalments Nos. 1, 2, 4 and 5 were not paid by Renusagar on the due dates. Renusagar moved the Government of India for approval to the revised schedules regarding the payments of the instalments to General Electric. The said request of Renusagar was, however, not accepted by the Government of India and by their letter dated August 1, 1969, the Government of India expressed their inability to agree to the revised proposals for repayment in view of the larger outgo of foreign exchange (by way of interest) which was not contemplated w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards administrative expenses and arbitration fees. Renusagar obtained an ex parte ad interim relief in the said suit. General Electric filed Arbitration Petition No. 96 of 1982 under section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 (hereinafter referred to as "the Foreign Awards Act"), seeking stay of Suit No. 832 of 1982 and all proceedings therein with a prayer for vacating the ad interim ex parte reliefs obtained by Renusagar in the said suit. Both the matters, namely, stay petition of General Electric under section 3 of the Foreign Awards Act and Renusagar's notice of motion for confirmation of ad interim relief were heard together and disposed of by a learned single judge of the Bombay High Court by a common judgment and order dated April 20, 1983, whereby the prayer for stay of the suit filed by General Electric under section 3 of the Foreign Awards Act was allowed and all proceedings in the said suit were stayed and all the interim reliefs which were granted earlier by ad interim order were vacated. C. A. Nos. 404-405 of 1983 filed by Renusagar against the said judgment of the learned single judge were dismissed by a Division Bench of the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judge, Mirzapur, were stayed under section 3 of the Foreign Awards Act. We may now revert to the arbitration proceedings. After the decision of the learned single judge of the Bombay High Court staying further proceedings in Suit No. 832 of 1992 and vacating the interim order passed in the said suit, Renusagar entered into the arbitration proceedings on June 9, 1983, under protest and without prejudice to its claim on the arbitrability and gave answers to the claims of General Electric and also made counter-claims. On February 7 and 8, 1984, both the parties met with the Arbitral Tribunal in Paris and agreed to sign the terms of reference, though Renusagar did so under protest and without prejudice. Certain amendments were subsequently made in the terms of reference. In the said terms of reference the issues to be determined were defined in clauses ( a ) to (cc) of para 22. Issues in clauses ( a ) to ( f ) of para 22 of the terms of reference were determined by an interim award on December 11, 1984, wherein the Arbitral Tribunal found that General Electric and Renusagar were parties to a valid agreement to arbitrate all disputes between them arising out of or related to the 1964 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f typed submissions, exhibits and legal authorities, (General Electric having presented 19 and Renusagar 14) and in addition each party had put before the Arbitral Tribunal a large number of papers. On October 2, 3 and 4, 1985, the Arbitral Tribunal considered the said documents as well as the written submissions of Renusagar on issues ( a ) to (bb) of the terms of reference and heard the arguments of counsel for General Electric in reply. The Arbitral Tribunal also considered the submissions of Renusagar on the validity of the claim of entitlement of General Electric to "dollar for dollar" foreign tax credit at the relevant period in this action and also heard General Electric on the question of costs. Thereafter, the Arbitral Tribunal by a majority (Dr. Dixit dissenting) made the award on September 16, 1986. The Arbitral Tribunal upheld the claim of GEC for US dollars 2,130,785.52 towards regular interest which was withheld by Renusagar. It was not disputed by Renusagar that it had retained the said amount. The issue was whether by doing so Renusagar acted wrongfully. The Arbitral Tribunal has found that the said withholding or retention of the amount of interest by Renusagar w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Arbitral Tribunal awarded compensatory damages computed by applying the average prime rate to the amounts withheld commencing with the dates listed in the statement and compounded annually commencing with the last day of the calendar year for each amount. The Arbitral Tribunal rejected the contention urged on behalf of Renusagar that the award of interest on regular interest as compensatory damages would violate the public policy of the State of New York against "interest on interest". Relying upon the decision of the New York Court of Claims in City of New York v. State of New York [1978] 408 NYS 2d 702, 707, the Arbitral Tribunal held that interest on interest is not against public policy in the State of New York. The Arbitral Tribunal also rejected the contention of Renusagar that it would violate New York's public policy to award compound interest as compensatory damages and, after referring to the various decisions of the courts in the State of New York, the Arbitral Tribunal has held that compounding of interest is equally appropriate in actions of an equitable nature and in the circumstances of this case compounding of interest would not violate the public policy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arbitral Tribunal further held that General Electric was entitled to compensatory damages on the aforesaid amount of delinquent interest in the same manner as damages were to be computed on the unpaid amount of regular interest. The Arbitral Tribunal also upheld the claim of General Electric for US dollars 119,053.31 towards purchase price of spare parts and further held that the said claim was not barred by limitation in view of the acknowledgment by Renusagar in the telex dated March 25, 1976. The Arbitral Tribunal also held that compensatory damages were payable on account of Renusagar's failure to pay for spare parts in the same manner as damages for failure of Renusagar to pay regular interest. With regard to the counter-claim made by Renusagar, the Arbitral Tribunal had earlier rejected then purported withdrawal of the- said counter-claim in respect of items 2 to 8 by Renusagar and after considering the said counter-claim on merits, the Arbitral Tribunal rejected the same in respect of all the eight items. In view of the rejection of the counter-claims of Renusagar, the Arbitral Tribunal rejected the claim made by General Electric by way of reply to the claim of Renusagar. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pendency of the petition filed by General Electric for enforcement of the award. Renusagar contested the proceedings for enforcement of the award filed by General Electric in the Bombay High Court and submitted : ( i ) the award could not be filed as it did not become binding on the parties in the country in which the award was made as prescribed under section 7(1)( a )( v ) of the Foreign Awards Act and rule 801( c ) of the Rules framed by the Bombay High Court under the Foreign Awards Act; ( ii ) the Bombay High Court did not have the territorial jurisdiction to entertain the petition of General Electric under section 5 of the Act ; ( iii ) General Electric had failed to comply with the mandatory requirement of section 8(1)( a ) of the Foreign Awards Act and rule 801( a ) of the Rules framed by the Bombay High Court under the Foreign Awards Act inasmuch as neither the original award nor a copy thereof duly authenticated as required by the law of the country had been produced along with the application ; ( iv ) the award sought to be enforced was a nullity and should be ignored as the arbitrators had become functus officio in view of institution of Suit No. 127 of 1982 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressed in US dollars to Indian rupees, the learned judges have dealt with the said question and taking into consideration the decision of this court in Forasol v. Oil and Natural Gas Commission [1984] 1 SCR 526 ; [1986] 60 Comp. Cas. 286 (SC) they have directed that the date of conversion of the decretal amount which is in US dollars to Indian rupees shall be the date on which the learned single judge completed pronouncing judgment, i.e. , October 21, 1988 and that the opening rate of exchange shall be the selling rate of US dollars as ascertained by the State Bank of India. The learned judges have granted a certificate for appeal to this court under article 134A read with article 133 of the Constitution since they left that the case involves substantial questions of law of general importance which need to be decided by this court. Civil Appeal No. 71 of 1990 has been filed by Renusagar on the basis of the said certificate against the judgment of the Division Bench of the High Court dated October 12, 1989. Renusagar has also filed Civil Appeal No. 71A of 1990 against the judgment of the learned single judge dated October 21, 1988, after obtaining special leave to appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring for General Electric, have made elaborate submissions before us. The oral submissions have been supplemented by written submissions. During the course of his submissions, Shri Venugopal did not pursue some of the objections that were raised by Renusagar before the High Court. But at the same time he has raised certain objections which were not raised before the High Court. Shri Venugopal has not disputed the liability of Renusagar for US dollars 2,130,785.52 awarded under item No. 1 towards regular interest withheld by Renusagar and US dollars 119,053 awarded under item No. 5 towards price of spare parts. The submissions of Shri Venugopal are confined to the award of compensatory damages under items Nos. 2, 4 and 6, delinquent interest under item No. 3 and costs under item No. 7. The submissions of Shri Venugopal broadly fall under two heads : ( i ) enforceability of the award ; and ( ii ) the rate of exchange for conversion of the decretal amount from US dollars to Indian rupees. Before we proceed to examine the submissions made by learned counsel, we consider it necessary to briefly refer to the background in which the Foreign Awards Act was enacted because it would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try before it could go ahead and enforce the award in the courts of the place of enforcement. The ICC, in 1953, promoted a new treaty to govern international commercial arbitration. The proposals of ICC were taken up by the United Nations Economic and Social Council and it led to the adoption of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards at New York, 1958 (hereinafter referred to as "the New York Convention"). The New York Convention is an improvement on the Geneva Convention of 1927 in the sense that it provides for a much more simple and effective method of obtaining recognition and enforcement of foreign arbitral awards and it replaces Geneva Convention of 1927 as between the States which are parties to both the Conventions. The New York Convention also gives much wider effect to the validity of arbitration agreements than does the Geneva Protocol of 1923 (See Alen Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, 1991, second edition, pages 62-63). India was a party to the New York Convention. The Foreign Awards Act has been enacted to give effect to the New York Convention and for purposes connected there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as the original agreement for arbitration or a duly certified copy thereof and the production of evidence to prove that the award is a foreign award. Section 9 is a saving clause which excludes the applicability of the Act to matters specified therein. Section 10 provides for repeal of the Arbitration (Protocol and Convention) Act, 1937, in relation to foreign awards to which the Act applies. Section 11 provides for rule making power of the High Court. The New York Convention is appended as a schedule to the Foreign Awards Act. In the present case, we are concerned with conditions of enforcement laid down in section 7, which provides as follows : "7. Conditions for enforcement of foreign awards. ( 1 ) A foreign award may not be enforced under this Act ( a )if the party against whom it is sought to enforce the award proves to the court dealing with the case that ( i )the parties to the agreement were under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it, or failing any indication thereon, under the law of the country where the award was made ; or ( ii )that party was not given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the said objection raised by Renusagar, the Arbitral Tribunal had issued a further notice on September 2, 1985, stating that the effect of the rejection of the application under section 3 of the Foreign Awards Act would be considered as a preliminary issue at the scheduled meeting of the Arbitral Tribunal fixed for October 1, 1985. The submission of Shri Venugopal is that Renusagar was not informed by the Arbitral Tribunal that if the decision of the Arbitral Tribunal on the objection that the Arbitral Tribunal had become functus officio were to go against Renusagar, the Arbitral Tribunal would straightaway proceed to hear the case on the merits without informing Renusagar about its decision and that if Renusagar had been put on notice, it would have been able to decide whether to proceed with the merits or not and that the action of the Arbitral Tribunal in going into the merits of the dispute without notice to Renusagar was a gross, blatant and unpardonable violation of the principles of natural justice and the elementary tenets of fair play inasmuch as on account of the said procedure adopted by the Arbitral Tribunal, Renusagar was deprived of an opportunity to meet and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensatory damages under items Nos. 2 and 4, the Arbitral Tribunal has failed to deduct 46 per cent. US tax payable by General Electric on the amount of regular interest and delinquent interest and compensatory damages could only be awarded on the amount receivable by General Electric after deducting the said tax and this has resulted in unjust enrichment which is contrary to public policy ; ( ix )compensatory damages have been awarded by way of interest on interest and that too by compounding the rate of interest which is contrary to public policy of India and New York ; ( x )compensatory damages awarded on delinquent interest under item No. 4 constitutes award of damages upon damages which is contrary to public policy of India : ( xi )award of compensatory damages on regular interest under item No. 2 in respect of the period from 1970 to 1980 when the interim order passed by the Delhi High Court in the writ petition was operative was impermissible and against public policy ; ( xii )the amount awarded as costs is unconscionable and constitutes unjust enrichment inasmuch as it includes the amount which was admitted as part of the legal fees and expenses for proceedings in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th regard to issues 22( g ) to ( p ) and that in the sittings held from October 1, 1985, onwards, the Arbitral Tribunal had dealt with the rest of the issues which related to the counterclaim of Renusagar as well as the claim made by General Electric against the counterclaim which claims have been rejected by the Arbitral Tribunal ; ( iii ) public policy, conprehended in section 7(1)( b )( ii ) of the Foreign Awards Act is the public policy of India and does not cover the public policy of New York State; ( iv ) for the purpose of section 7(1)( b )( ii ) of the Foreign Awards Act the expression "public policy" has a narrower connotation than in domestic law; ( v ) the regular interest was wrongfully withheld by Renusagar because as a result of the failure on the part of Renusagar to deposit the amount of tax with the Government of India, General Electric was not able to claim relief under the US tax laws in respect of, the amount payable as tax in India on the interest and that the interim order passed by the Delhi High Court in the writ petition filed by Renusagar did not preclude Renusagar from either depositing the tax amount with the Government or remitting the interest amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court which claim of costs has been disallowed by the Arbitral Tribunal ; ( xii ) the rate of exchange for conversion of foreign currency in proceedings for enforcement of a foreign award is governed by the lex fori, i.e. , the law of the foram in which the proceedings have been instituted and not by the proper law of contract or the law of the place of performance ; ( xiii )the relevant date for conversion of US dollars into Indian rupees in proceedings for enforcement of a foreign award is the date of actual payment and not the date of judgment as held by the Division Bench of the High Court; ( xiv ) 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 has no application and in any event the said decision does not lay down the correct law and needs reconsideration ; ( xv ) although under the award interest has been awarded at 8 per cent. in respect of items Nos. 1, 3 and 5 only in view of the interim order passed by this court on February 21, 1990, interest at the rate of 10 per cent. is payable on the entire amount ; (xvi) since permission was not granted to Ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... February 21, 1990, and November6, 1990, and which has been withdrawn by General Electric ? I. Scope of enquiry in proceedings for recognition and enforcement of a foreign award under the Foreign Awards Act. During the course of his submissions, Shri Venugopal has assailed the award of the Arbitral Tribunal on grounds touching on the merits of the said award in so far as it relates to the award of compensatory damages on regular interest (item No. 2), delinquent interest (item No. 3), compensatory damages on delinquent interest (item No. 4) and compensatory damages on the price of spare parts (item No. 6). This gives rise to the question whether in proceedings for enforcement of a foreign award under the Foreign Awards Act it is permissible to impeach the award on the merits. With regard to enforcement of foreign judgments, the position at common raw is that a foreign judgment which is final and conclusive cannot be impeached for any error either of fact or of law and is impeach-able on the limited grounds, namely, the court of the foreign country did not, in the circumstances of case, have jurisdiction to give that judgment in the view of English law ; the judgment is vitia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration. The New York Convention seeks to remedy the said defects by providing for a much more simple and effective method of obtaining recognition and enforcement of foreign awards. Under the New York Convention, the party against whom the award is sought to be enforced can object to recognition and enforcement of the foreign award on grounds set out in sub-clauses ( a ) to ( e ) of clause (1) of article V and the court can, on its own motion, refuse recognition and enforcement of a foreign award for two additional reasons set out in sub-clauses ( a ) and ( b ) of clause (2) of article V. None of the grounds set out in sub-clauses ( a ) to ( e ) of clause (1) and sub-clauses ( a ) and ( b ) of clause (2) of article V postulates a challenge to the award on the merits. Albert Jan Van Berg in his treatise, The New York Arbitration Convention of 1958, page 267 : Towards a Uniform Judicial Interpretation, has expressed the view : "It is a generally accepted interpretation of the convention that the court before which the enforcement of the foreign award is sought may not review the merits of the award. The main reason is that the exhaustive list of grounds for refusal of enfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l at Paris for hearing which lasted for ten days between February 25 and March 8,1985, and during the course of the said hearing Renusagar presented typed submissions and legal authorities before the Arbitral Tribunal. In these hearings, the Arbitral Tribunal concluded hearing on issues 22( g ) to ( p ) and the matter was thereafter adjourned by the Arbitral Tribunal to June 10, but on account of the sudden illness of Dr. Dixit, one of the arbitrators, the matter had to be adjourned and it was ultimately fixed for October 1, 1985. On June 26, 1985, the chairman of the Arbitral Tribunal sent a notice to the parties wherein was stated that the adjourned hearing would take place in London on Tuesday from October 1 to 4 and to continue if necessary during the following week from October 7 to 11. In the said communication, it was further stated : "5. At the beginning of the hearing, the Tribunal will be prepared to hear submissions if necessary on the adequacy of the evidence before us on the relevant issues of US foreign tax credit. But the main purpose of the meeting is to deal with the respondent's counter claims together with the claimant's claims for 119,053 US dollars (unpaid p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question of our appearing before the arbitrators or their determining the plea raised by us cannot and does not arise". In the communication dated September 28, 1985, from Khaitan and Partners, it is stated : "We have been repeatedly informing you that the arbitrators have become functus officio . Therefore, be so kind as not to communicate with us any further regarding the arbitration which has become infructuous". From these documents, it would appear that the stand of Renusagar was that the arbitrators had become functus officio and they could not proceed with the arbitration and there was, therefore, no question of Renusagar appearing before the Arbitral Tribunal on the dates fixed for hearing. In these circumstances, it is not open to Renusagar to say that the Arbitral Tribunal, after having rejected, (by majority) the said objection raised by Renusagar, by order dated, October 1, 1985, should have given a further notice to Renusagar asking them to appear to make their submission before the Arbitral Tribunal on the merits on issues 22( q ) to 22(bb). In this context, it may also be stated that issues 22( q ) and 22( r ) relate to the claim of US dollars 119,053.91 for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the public policy of India or law of India, there is no such limitation in section 7(1)( b )( ii ) of the Foreign Awards Act. Shri Venugopal has also placed reliance on the decision of this court in V/O Tractoroexport, Moscow v. Tarapore and Co. [1970] 3 SCR 53 ; AIR 1971 SC 1, wherein this court has held that there was clear deviation from the rigid and strict rule that the courts must stay a suit whenever an international commercial arbitration as contemplated by the protocol and the Conventions was to take place and that it was open to the Legislature to deviate from the terms of the protocol and the Convention and that it appears to have given only a limited effect to the provisions of the 1958 Convention. We find it difficult to accept this contention. It cannot be held that by not using the words "public policy of India" and only using the words "public policy" in section 7(1)( b )( ii ) of the Foreign Awards Act, Parliament intended to deviate from the provisions of the New York Convention contained in article V(2)( b ) which uses the words "public policy of that country" implying public policy of the country where recognition and enforcement is sought. That Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been annulled in the country in which it was made, or ( b )the party against whom it is sought to enforce the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case, or was under some legal incapacity and was not properly represented, or ( c )the award does not deal with all the questions referred or contains decisions on matters beyond the scope of the agreement for arbitration : Provided that if the award does not deal with all questions referred the court may, if it thinks fit, either postpone the enforcement of the award or order its enforcement subject to the giving of such security by the person seeking to enforce it as the court may think fit : (3) If a party seeking to resist the enforcement of a foreign award proves that there is any ground other than the non-existence of the conditions specified in clauses ( a ), ( b ) and ( c ) of sub-section (1), or the existence of the conditions specified in clauses ( b ) and ( c ) of sub section (2), entitling him to contest the validity of the award, the court may, if it thinks fit, either refuse to enforce the award or adjourn the hearing until after the expiration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text books have expressed the view that they only mean "English public policy". In Russel on Arbitration, 12th edition, at page 384, it is stated : "The New York Convention is to the same effect. Accordingly, though the 1975 Act does not so specify, it must be taken that the reference is intended to English public policy which indeed is the only public policy into which the English courts can sensibly inquire". The same view is expressed in Dicey and Morris, The Conflict of Laws, 11th edition, volume 1, at pages 586-87. We are, therefore, of the view that the words "public policy" used in section 7(1)( b )( ii ) of the Foreign Awards Act refer to the public policy of India and the recognition and enforcement of the award of the Arbitral Tribunal cannot be questioned on the ground that it is contrary to the public policy of the State of New York. IV. Meaning of "public policy" in section 7 ( 1 )( b )( ii ) of the Act. -While observing that "from the very nature of things, the expressions 'public policy 'opposed to public policy' or 'contrary to public policy' are incapable of precise definition", this court has laid down "Public policy connotes some matter which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary to the public policy of the country in which it is sought to be invoked or enforced. The English courts follow the following principles : "Exceptionally, the English court will not enforce or recognise a right conferred or a duty imposed by a foreign law where, on the facts of the particular case, enforcement or, as the case may be, recognition, would be contrary to a fundamental policy of English law. The court has, therefore, refused in certain cases to apply foreign law where to do so would in the particular circumstances be contrary to the interests of the United Kingdom or contrary to justice or morality". (See Halsbury's Laws of England, fourth edition, volume 8, para 418). A distinction is drawn while applying the said rule of public policy between a matter governed by domestic law and a matter involving conflict Of laws. The application of the doctrine of public policy in the field of conflict of laws is more limited than that in the domestic law and the courts are slower to invoke public policy in cases involving a foreign element than when a purely municipal legal issue is involved. (See Vervaeke v. Smith [1983] 1 AC 145 (HL), at page 164 ; Dicey and Morri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... freedom of action ;" (See Cheshire and North Private International Law, 12th edition, pages 131-133). As observed by Lord Simon of Glaisdale "an English court will exercise such a jurisdiction with extreme reserve". ( Vervaeke v. Smith [1983] 1 AC 145 (HL), at page 164). In Dalmia Dairy Industries Ltd. v. National Bank of Pakistan [1978] 2 Lloyd's Rep 223, the Court of Appeal refused to extend the doctrine of public policy to embrace the principle that the English courts should refuse to enforce an award arising out of a contract between persons who are nationals of foreign States which were at war with each other but each of which was in friendly relationship with England. In support of the applicability of the doctrine, it was argued that it would be harmful to international relations of the United Kingdom with friendly countries if it were to allow the machinery of its courts to be used to enforce a judgment, or an arbitral award in favour of a national of one foreign State friendly to the United Kingdom, against the national of another foreign State, also friendly to the United Kingdom, when the two foreign States are enemies of one another. Negativing the said c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement as well as the "parochial concept that all disputes must be resolved under our laws and in our courts". It has been observed : "We cannot have trade and commerce in world markets and international waters exclusively on our terms, governed by our laws, and resolved in our courts". ( Fritz Scherk v. Alberto-Culver Co. (41 L Ed 2d 270 at pages 279 and 281). Similarly in Mitsubishi Motors Corporation v. Soler Chrysler Plymouth Inc. (87 L Ed 2d 444), it was observed (at pages 456-57) : "We conclude that concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties' agreement, even assuming that a contrary result would be forthcoming in a domestic context". In France, a distinction is made between international public policy ("ordre public international") and the national public policy. Under the new French Code of Civil Procedure, an international arbitral award can be set aside if the recognition or execution is contrary to international public policy. In doing so, it recognise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of relevance to mention that under article I( e ) of the Geneva Convention Act of 1927, it is permissible to raise an objection to the enforcement of an arbitral award on the ground that the recognition or enforcement of the award is contrary to the public policy or to the principles of the law of the country in which it is sought to be relied upon. To the same effect is the provision in section 7(1) of the Protocol and Convention Act of 1937 which requires that the enforcement of the foreign award must not be contrary to the public policy or the law of India. Since the expression "public policy" covers the field not covered by the words "and the law of India" which follow the said expression, contravention of law alone will not attract the bar of public policy and something more than contravention of law is required. Article V(2)( b ) of the New York Convention of 1958 and section 7(1)( b )( ii ) of the Foreign Awards Act do not postulate refusal of recognition and enforcement of a foreign award on the ground that it is contrary to the law of the country of enforcement and the ground of challenge is confined to the recognition and enforcement being contrary to the public policy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in the preamble, the Foreign Exchange Regulation Act is a law regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency for the conservation of the foreign exchange resources of the country and the proper utilisation thereof in the interests of the economic development of the country. It was preceded by the Foreign Exchange Regulation Act, 1947. Similar enactments providing for exchange control exist in other countries. In the United Kingdom, there is a similar enactment, viz. , the Exchange Control Act, 1947, which remains in force but its operation has been suspended since 1979. The view of the English courts is that the exchange control legislation does not belong to the field of revenue laws and application of such law is not obnoxious to English public policy (see Kahler v. Midland Bank Ltd. [1949] 2 All ER 621 ; [1950] AC 24 (HL), at pages 27, 36, 46-47 and 57 ; Zivnostenska Banka National Corporation v. Frankman [1949] 2 All ER 671; [1950] AC 57 (HL), at pages 72 and 78). In Helbert Wagg and Co. Ltd., In re [1956] 1 Ch. 323, 349, 351; [1956] 1 All ER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 statement of law reference has been made to the decision of the House of Lords in Boissevain v. Weil [1950] AC 527, 341; [1950] 1 All ER 728, 734 (HL). In that case, the respondent, a British subject, and the appellant, a Dutch subject, were involuntarily resident in Monaco, an enemy-occupied territory, in 1944, due to war conditions. The respondent borrowed a sum of 960,000 French francs from the appellant in Monaco on an undertaking to repay the money in sterling in London at an agreed rate of 160 francs to the pound and drew cheques in blank for the full amount on the English bank. The appellant filed a suit in England claiming 6,000 pounds from the respondent. The said claim was opposed by the respondent on the ground that the loans given by the appellant to the respondent were invalid and illegal being contrary to regulation 2(1) of the Defence (Finance) Regulations, 1939. The said claim of the appellant was allowed by the trial judge, but on appeal, it was dismissed by the Court of Appeal. The House of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision 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 been made in favour of the appellant who was a national of Holland against the respondent who was an Austrian whereby the respondent was directed to pay to the appellant DM 667,500. The appellant sought enforcement of the award in Austria and the said enforcement was opposed by the respondent on the ground that the underlying contracts, though nominally delivery contracts, were in reality sales and purchases on a margin basis and such contracts are contrary to Austrian foreign exchange law, unless specific authorisation therefor was given by the competent authorities. The respondent invoked article V(2)( b ) of the New York Convention, 1958, to oppose the recognition and enforcement of the award. The Austrian Supreme Court dismissed the claim of the Dutch national and held that the award could not be recognised and enforced by the court in View of article V(2)( b ) of the New York Convention and, in that context, it was held (at page 422) : "that the transactions concluded between the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal 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 Exchange Regulation Act. As regards the first submission relating to award of delinquent interest, it may be stated that the said submission involves an attack on the merits of the award which is impermissible at the stage of enforcement. We have, however, examined this submission on the merits and are of the view that it is without substance. Shri Venugopal has urged that under the original approval of January 2, 1964, by the Government of India of the terms of the loan by General Electric to Renusagar the total amount of loan was to be repaid in 16 equal semi-annual instalments between the 30th and the 120th month from the effective date of the contract with specific provision for Interest from the 16th to the 30th month to be capitalised and the interest was specifically restricted to the period from the 16th to the 30th month and thereafter on capitalisation from the 30th month to the 120th month and that no interest was payable without the Foreign Exchange Regulation Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 said that the award of interest for delayed payment of instalments involved violation of the provisions of the Foreign Exchange Regulation Act. Shri Venugopal has submitted that in Renusagar case I this court was only required to consider the question of arbitrability of the disputes and was not concerned with the merits of the claim and, therefore, the said decision cannot be held to conclude the matter. We are unable to agree. It is true that in that case this court was considering the question of arbitrability of the disputes but for the purpose of deciding that issue it was necessary to consider whether disputes arose out of or are related to the contract and for that purpose it was necessary to construe the terms of the contract and it cannot, therefore, be said that the said decision does not conclude this aspect of the matter. In this context, it may also be pointed out that after the decision in Renusagar case I, an application for clarificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition." 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 said Act was more or less similar to section 47(3) of the Foreign Exchange Regulation Act. This court has held : "Sub-section (3) allows legal proceedings to be brought to recover sum due as a debt, damages or otherwise, but no steps shall be taken to enforce the judgment, etc., except to the extent permitted by the Reserve Bank. The effect of these provisions is to prevent the very thing which is claimed here, namely, that the Foreign Exchange Regulation Act arms persons against performance of their contracts by setting up the shield of illegality. An implied term is engrafted upon the contract of parties by the second part of sub-section (2), and by sub-section (3), the responsibility of obtaining the permission of the Reserve Bank before enforcing the judgment, decree or order of the court, is transferred to the decree-holder. The section is perfectly plain, though perhaps it might have been worded better for which a model exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Arbitral Tribunal. We are, therefore, unable to hold that the enforcement of the award would involve violation of any of the provisions of the Foreign Exchange Regulation Act and for that reason it would be contrary to public policy of India so as to render the award unenforceable in view of section 7(1)( b )( ii ) of the Act. ( b ) Disregard of the orders of the Delhi High Court-It is the fundamental principle of law that orders of courts must be complied with for any action which involves disregard for such orders would adversely affect the administration of justice and would be destructive of the rule of law and would be contrary to public policy. The question, however, is whether the enforcement of the award of the Arbitral Tribunal would involve disregard of any order of a court. The submission of Shri Venugopal is that in the matter of withholding of payment of regular interest Renusagar were acting in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plementation 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 granted under orders dated September 3, 1965, and June 7,1967. The only condition imposed by the court was that Renusagar was required to give security for Rs. 4,00,000 to the satisfaction of Commissioner of Income-tax, Lucknow, within one month. These orders would, therefore, show that on the furnishing of the said security Renusagar was free to remit regular interest at 6 per cent. per annum to General Electric as per the approval granted under orders dated September 8, 1965, and June 7, 1967. The said orders of the Delhi High Court did not also prevent Renusagar from depositing in the Government treasury the income-tax payable on the amount of regular interest payable at 6% per cent. per annum. The said orders instead of preventing Renusagar from remitting the said amount of tax free interest in fact permitted Renusagar to make the said payments to General Electric. It cannot, therefore, be said that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory 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 (Miscellaneous Provisions) Act, 1934, power was conferred on the court of record to award interest in proceedings for recovery of any debt or damages where the debt remained unpaid until the judgment was given. Section 3 of the 1934 Act was repealed and replaced by section 35A inserted in the Supreme Court Act, 1981, by the Administration of Justice Act, 1982, and power to award interest was extended to cover a case where the debt is paid late, after proceedings for its recovery have begun but before they have been concluded. The power to award interest does not extend to a case where a debt is paid later but before any proceeding for its recovery have begun. The rule in London, Chatham and Dover Rail Co.'s case [1893] AC 429 (HL) has been qualified by the Court of Appeal in Wadsworth v. Lydall [1981] 2 All ER 401 to apply only to claims for interest by way of general damag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral 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 Industries Canada Ltd. [1987] 16 CPR (3d) 193 at page 201). This would show that award of interest on damages or interest on interest, i.e. , compound interest, is not regarded as being against public policy in these countries. We may now examine the law governing award of interest in India. Shri Venugopal has placed reliance on the provisions of section 3(3)( c ) of the Interest Act, 1978. Section 3 empowers a court to allow interest and sub-section (3) of the said section provides exceptions to the main provision. In clause ( c ) of sub-section (3) it is laid down that nothing in this section shall empower the court to award interest upon interest. Shri Venugopal has also placed reliance on the decision of the Judicial Committee of the Privy Council in Bengal Nagpur Railway Co. Ltd. v. Ruttavji Ramji, AIR 1938 PC 67, and the decisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 compensatory damages under item No. 4 amounts to award of damages on damages which is impermissible and is contrary to public policy of India. In support of this submission, Shri Venugopal has placed reliance on the decision of this court in Trojan and Co. Ltd. v. Rm. N. N. Nagappa Chettiar [1953] SCR 789 ; AIR 1953 SC 235, wherein interest had been allowed on damages and it was contended before this court that the said interest could not be allowed on damages because it would amount to awarding damages on damages which is opposed to precedent and principle. The court rejected the said contention and held that interest is allowed by court of equity in the case of money obtained or retained by fraud and in that case, the plaintiff had paid the money to defendants on account of fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 enforcement of the award was contrary to Romanian public policy since it resulted in unjust enrichment of the Romanian enterprise inasmuch as the said enterprise was allowed to receive for the second time the price of goods which had already been paid by the Iranian buyers. Rejecting the said objection the Romanian Supreme Court held that the arbitral award showed that the Romanian enterprise meant to obtain repayment of the value of the cargo and the freight on behalf of the Iranian buyer acting as agent or trust and since the Romanian interpose did not act on its own behalf, although it had no express mandate, the conditions for unjust enrichment were not met in the case at issue and, consequently, the public policy of Romanian international private law had not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 4 and 7, which is beyond the scope of the objections that can be raised under section 7(1)( b )( ii ) of the Foreign Awards Act. To hold otherwise would mean that in every case where the arbitrators award an amount which is higher than the amount that should have been awarded, the award would be open to challenge on the ground of unjust enrichment. Such a course is not permissible under the New York Convention and the Foreign Awards Act. We have, however examined the objections raised by Renusagar relating to unjust enrichment even on the merits and we are not satisfied that the amounts awarded under items Nos. 2, 3, 4 and 7 are so excessive as to result in unjust enrichment of General Electric. One of the contentions that was urged by Shri Venugop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subsequent to the maturity of the promissory notes till payment. There is, therefore, no substance in the contention about unjust enrichment on this account. With regard to the award of delinquent interest under item No. 3 and compensatory damages on the delinquent interest under item No. 4 it has been contended that in view of the agreement between General Electric and Renusagar for rescheduling of the instalments Renusagar were not required to pay the instalments as per the original schedule and, therefore, Renusagar could not be held liable for interest for delayed payment of the instalments which fall due till August 1, 1969, and they could not be saddled with compensatory damages for non-payment of instalments that fall due ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionis. (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 liability, (see Dicey and Morris, The Conflict of Laws, pages 1442 and 1453). By this process the quantum of the monetary obligation -is determined. Questions relating to conversion of currency often arise at the stage of discharge of the monetary obligation when the debtor makes the payment in a currency other than the money of payment. Such conversion is to be made on the basis of the exchange rate prevailing on the date of payment at the place of payment. (See Dice and Morris, The Conflict of Laws, rule 210(2), at pages 1453-54 ; Mann, The Legal Aspect of Money, 5th edition, page 323). Conversion of the currency is also necessary in cases where legal proceedings have to be instituted by the creditor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancs. 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 in Schorsch Meier GmbH v. Hennin [1975] QB 416, the seller amended his statement of claim so as to claim the amount due to him in Swiss francs as an alternative to claiming judgment in sterling. Bristow J. gave judgment for the moneys due expressed in sterling, holding that the rule that the English courts could express their judgments only in sterling had not been altered either by Parliament or by any decision of the House of Lords. The Court of Appeal reversed the said decision and, following Schorsch Meier GmbH v. Hennin [1975] QB 416 ; [1975] 1 All ER 152 (CA), gave judgment for the seller ordering the buyers to pay the sum due in Swiss francs, or the equival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards, 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 a minor discrepancy, if the practice which is apparently adopted (see Jugoslavensha Oceanska Plovidba's case [1974] QB 292, 305 (CA)) remains as it is, but I can see no reason why, if desired, that practice should not be adjusted so as to enable conversion to be made as at the date when leave to enforce in sterling is given." The impact of Miliangos v. George Frank ( Textiles ) Ltd. [1975] 3 All ER 801 (HL) was not confined to the British shores. It has been felt across the Atlantic and there is a perceptible change in the law in Canada as well as in the United States. Following the law in Engla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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. 763, one of the cases on which reliance was placed by Shri Venugopal, the action was brought to enforce a judgment entered in favour of the plaintiff by the courts of Switzerland and the United States District Court in New York held that the date of entry of the Swiss judgment, rather than the date of breach of the underlying (Obligation, i.e. , its agreement to repay certain notes, was controlling as to application of the breach-day conversion rule. It was held that the date of award for damages by the Cantonal Court was relevant date for applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 to be made in French francs but did not specify the rate of exchange at which the French francs were to be converted into Indian rupees. Proceedings were initiated in the Delhi High Court for passing a decree in terms of the award and a question arose as to the exchange rate for conversion of French francs into Indian rupees. This court examined the question with reference to the following dates: (1)the date when the amount become due and payable ; (2)the date of the commencement of the action ; (3)the date of the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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-holder by raising objection to the conduct of the sale and at times, a fresh auction sale may have to be held if the auction purchaser commits default in paying the balance of the purchase price and a considerable time would thus elapse between the date when the court orders execution to issue and the date of the receipt of the sale proceeds by the decree-holder. It was also pointed out that at times the judgment debt is not recovered in full when the attached property is sold in execution and further application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction 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 granted or the defendant not making payment in foreign currency or in Indian rupees, Whether such permission has been granted or not, the defendant do pay to the plaintiff the rupee equivalent of the foreign currency sum claimed at the rate of exchange prevailing on the date of the judgment. For the purposes of court-fees and jurisdiction the plaintiff should, however, value his claim in the suit by converting the foreign currency sum claimed by him into Indian rupees at the rate of exchange prevailing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 concerned with here just as the courts have power to make a decree for a sum of money expressed in a foreign currency subject to the limitations and conditions we have set out above, the arbitrators or umpire have the power to make an award for a sum of money expressed in a foreign currency. The arbitrators or umpire should, however, provide in the award for the rate of exchange at which the sum awarded in a foreign curfency should be converted in the events mentioned above. This may be done by the arbitrato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions 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 the Foreign Awards Act which lays down that a foreign award shall subject to the provisions of this Act be enforceable in India as if it were an award made on a matter referred to arbitration in' India. The said provision equates a foreign award to an Indian award for the purpose of enforcement with the exception that such enforcement will be subject to the provisions of the Foreign Awards Act. There is nothing in the provisions of the Foreign Awards Act which excludes the applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed) ? 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 with reference to the rate prevailing at the date of maturity or payment, or calculated at the Gibraltar or Madrid rate-these are substantial matters on which the quantum eventually received by the creditor depends, if payment is not made in actual pesetas. These aspects, therefore, cannot be described as relating merely to the mode of performance, but ought to be subject to the proper law of the contract". We find that in the said passage which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 expressed or damages are calculated (money of account), the currency in which the debt or liability can and must be discharged (money of payment) is determined by the law of the country in which such debt or liability is payable, but ( semble ) the rate of exchange at which the money of account must be converted into the money of payment is determined by the proper law of the contract or other law governing the liability. If a sum of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 said rule relates to payment made by a debtor in discharge of the debt and does not deal with proceedings in courts for enforcement of foreign currency obligations which have been dealt with in rule 211, which is in the following terms : "211. (1) An English court can give judgment for an amount expressed in foreign currency. (2) For procedural reasons the amount of the judgment must be converted int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndency 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 applicable to civil judgments." (See Redfern and Hunter, Law and Practice of International Commercial Arbitration, 2nd edition, page 406). Moreover, section 4(1) of the Foreign Awards Act lays down that the foreign award shall, subject to the provisions of this Act, be enforceable in India as if it were an award made on a matter referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in view of the said order passed by this court on February 21, 1990, General Electric is entitled to an award of interest at 10 per cent. per annum on the decretal amount after deducting the amounts deposited by Renusagar in pursuance to the orders dated February 21, 1990, and November 6, 1990. The order dated February 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion 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 out of a sum of Rs. 10.69 crores which was received by General Electric, it was permitted by the Reserve Bank of India to utilise only Rs. 3.52 crores for meeting administrative and operational expenses of the Liaison Officer of General Electric and the res of the amount would be converted only after the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 place of Renusagar. The said application has been moved on the ground that after the filing of the said appeal, the Bombay High Court, by its order dated April 22, 1993, has sanctioned a scheme of amalgamation of Renusagar with H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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