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TMI Blog2024 (8) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... of the proceedings under the objections petition. It was permitted to be withdrawn against a bank guarantee of an Indian bank. Here the respondent was entirely unable to withdraw the amount, while the issue there was that it was only unable to convert the amount to US dollars. However, in both cases, the respondent failed to move the Court for necessary orders to be able to receive and utilise the amount. In this case, there is the added fact that the respondent consented to the deposit and the condition requiring security. In light of these similarities, it is appropriate to adopt the Court s approach in Renusagar. The deposit of Rs. 7.5 crores stands converted as on the date of deposit (22.10.2010), when the rate of exchange as submitted by the appellants is 1 euro = Rs. 59.17. The submission that the respondent was unable to furnish a bank guarantee of an Indian bank, also rejected. This argument is only to serve its own interest to be able to benefit from a higher exchange rate but does not address the principle that operates while enforcing a sum expressed in foreign currency. A similar logic underscores the statutory provisions in Order 21, Rule 1 and Order 24 of the Code of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount must be converted on the date when the arbitral award becomes enforceable, i.e., when the objections against it are finally decided. Appeal allowed in part. - PAMIDIGHANTAM SRI NARASIMHA And ARAVIND KUMAR , JJ. JUDGMENT PAMIDIGHANTAM SRI NARASIMHA, J. 1. The issue arising in the present appeal relates to enforcement of an arbitral award expressed in foreign currency. In this context, two questions arise for consideration. First, what is the correct and appropriate date to determine the foreign exchange rate for converting the award amount expressed in foreign currency to Indian rupees. Second, what would be the date of such conversion, when the award debtor deposits some amount before the court during the pendency of proceedings challenging the award. Two uncertainties have a direct bearing on the question to be answered, the time lapse between the date of the award and its enforceability2 a local factor, and the ever-fluctuating exchange rates- a global factor. 1.1 Taking into account these two factors and the statutory provisions, coupled with the decisions of this Court, we have formulated twin principles: First, following the principle in Forasol v. Oil and Natural Gas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. It has been agreed by learned counsel for the appellants that the appeal as well as the application under Section 34 of the Arbitration and Conciliation Act, 1996 would be dismissed as withdrawn. It has been further agreed that the appellants would deposit an amount of Rs.7.5 Crores before the Executing Court on or before 08.11.2010. It has been agreed by learned counsel for the respondent that the application under Section 48 which has been filed by the appellants would be decided on its own merits without being influenced by any findings or observations in the order on the application under Section 34 dated 28.04.2010. It has further been agreed by learned counsel for the respondent that the amount of Rs. 7.5 Crores which would be deposited by the appellants would be released to it only consequent to furnishing a bank guarantee of a scheduled bank of India in the amount of Rs. 7.5 Crores in favour of the Executing Court and the said bank guarantee would be kept alive during the proceedings under Section 48 and for a period of 60 days thereafter. The final order thereon would obviously be passed by the Executing Court after the conclusion of the proceedings under Section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Delhi High Court s decision in Progetto Grano S.P.A. v. Shri Lal Mahal Limited6, against which this Court dismissed the SLP7, where it was held that the relevant date for conversion is when the objections filed under Section 48 are finally decided. Further, the Court referred to Section 49 of the Act8 that provides that the foreign arbitral award shall be deemed to be a decree of the court when it is satisfied that it is enforceable under Part II, Chapter I of the Act. It reasoned that such satisfaction required under Section 49 is complete only when the objections filed under Section 48 are finally decided, which was on 01.07.2014 in the present case (when the High Court dismissed the revision). It also observed that the appellants delayed execution of the award by initially filing under Section 34, despite such application not being maintainable and then filing an appeal against this order and subsequently withdrawing it. The appellants cannot be permitted to benefit from the fluctuation in exchange rates when the delay is attributable to them. Therefore, the relevant date for conversion is 01.07.2014. 2.7 While issuing notice on the special leave petition filed by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest pending payment was euros 4,17,278.78, i.e., after converting and adjusting the earlier deposit against the award. Using the prevailing exchange rate of 1 euro = Rs. 62.89 as on 15.07.2011, the appellant s deposit amounts to euros 79,503.90. Therefore, a balance of euros 3,37,774.88, along with interest, remains pending for which the exchange rate as on 01.07.2014 would apply. 3.1 Mr. Mishra concluded by submitting that the appellants would be required to pay only Rs. 3.19 crores if their calculation is accepted. On the other hand, if the impugned judgment is upheld, they would be required to be pay more than double the amount, i.e., Rs. 6.48 crores. 3.2 Mr. Abhay Mahajan, learned counsel, appearing for the respondent submitted that the exchange rate on 01.07.2014 would apply to the entire award amount. He submitted that the respondent had not consented to the deposit of Rs. 7.5 crores and that the High Court did not convert the amount but only directed deposit of a lump sum amount. He relied on this Court s decision in P.S.L. Ramanathan Chettiar v. O.R.M.P.R.M. Ramanathan Chettiar10 where it was held that the judgment debtor depositing a sum in court during the pendency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to enforce a foreign award under Section 48.15 Finally, Section 51 16 is a savings clause and Section 5217 provides that Chapter II of Part II shall not apply to awards governed under this Chapter. 4.1 From the statutory scheme, it is clear that a foreign arbitral award is binding between the parties when it is enforceable under Part II, Chapter I of the Act (Section 46). The enforceability of the award can be challenged under Section 48, and the order passed on such an application can be appealed under Section 50 only if it is allowed and the court refuses enforcement of the award. Therefore, a foreign award can be enforced when the objections against it are finally decided and dismissed. At this point, the award is deemed to be a decree of the court as per Section 49.18 Unlike under the Arbitration Act, 1940, there is no requirement for a separate decree by a court for making the award a rule of the court.19 5. Case-law on Relevant Date for Conversion: Now, we will discuss the case-law on the relevant date of conversion, both in the context of arbitral awards and judgments where the decretal amount is expressed in a foreign currency. The seminal case that first decided this ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral awards, the date of award is the relevant date for determining the exchange rate. This was a departure from the breach date rule , i.e., the conversion must be as per the exchange rate on the date when the debt was payable, which principle was laid down by the House of Lords in the Havana case25. Subsequently, in the Schorsch Meier case26 (this was not a case of arbitration but a claim for payment of price of goods in a foreign currency filed before English courts), the Court of Appeal held that the date of conversion should be the date of payment, i.e., the date on which the court authorises enforcement of the judgment in terms of sterling. Finally, in the Miliangos case27, the House of Lords also held that the date of conversion should be the date when the court authorises enforcement of the judgment in terms of sterling pound. While Jugoslavenska (supra) was not expressly overruled by the House of Lords, its correctness was doubted. 5.4 The Court held that there is no bar on courts in India to pass a decree for a sum expressed in foreign currency. However, for the purpose of payment of such amount, the limitations and restrictions under the Foreign Exchange Regulation Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process of execution in India is a lengthy one that may require attachment of property, deciding third party claims to such property, proclamation with particulars, and auction sale. Moreover, multiple applications for execution may be required if the initial attachment and sale does not cover the decretal amount. Hence, it may lead to a situation where there are multiple execution orders, meaning multiple exchange rates would have to be considered. Another difficulty is that the execution application itself requires the amount to be expressed in Indian currency.32 v. The date of payment was also rejected as the proper date due to practical and procedural difficulties of having to pay court fees on a determined amount in Indian rupee; the pecuniary limit of the jurisdiction of courts would depend on the amount claimed, which must again be in Indian rupee; and execution is for a specific sum expressed in Indian rupee. For these reasons, the Court held that the conversion of the amount to the domestic currency cannot be left to the date of payment as the legal procedures in India require the amount to be determined in domestic currency before that.33 vi. Among the remaining dates, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the High Court allowed the enforcement of the award and dismissed Renusagar s objections under Section 7 of this Act. The matter was then appealed to this Court, which dealt with several issues on objections to the enforceability of foreign awards, including the scope of inquiry under Section 7 and the meaning of public policy . The most relevant issues framed by the Court, for our purpose, are which law would govern the rate of exchange for conversion in proceedings for enforcement of a foreign arbitral award and whether Forasol (supra) required reconsideration. The Court held that the applicable law to determine the proper date for conversion is the lex fori41, which would be Indian law. After extensively discussing the principles under English law as well as the reasoning in Forasol (supra), the Court rejected the contention that Forasol (supra) required reconsideration42. 7. The law laid down in Forasol (supra) has also been used in other cases though they do not pertain to arbitration but involved an issue of a debt expressed in foreign currency that required to be converted to Indian rupee. United India Insurance Co. Ltd. v. Kantika Colour Lab43 involved a consumer compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressed in foreign currency: 9.1 In Fuerst Day Lawson v. Jindal Exports Ltd47, the High Court relied on Forasol (supra) and analogised that the date on which the objections to the enforcement of the award are finally rejected and the foreign award becomes enforceable would be the date that it is deemed to be a decree under Section 49. Hence, this would be the relevant conversion date. 9.2 This case was followed in Progetto (supra), where the relevant date was held to be when this Court dismissed the SLP in the objections petition. The award debtor herein had deposited the entire amount only after the dismissal of the SLP by using the exchange rate as on the date of deposit, which was higher than the rate as on date of dismissal of SLP. Hence, the High Court while deciding the execution petition directed refund of the excess amount by using the date of this Court s order as the relevant date. In so far as the present appeal is concerned, we have already mentioned that the respondent was permitted to withdraw 7.5 crores during the pendency of the proceedings. 9.3 Similarly, in Trammo AG v. MMTC Limited48, the date of dismissal of review by this Court in the proceedings to set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court order dismissing the appellants objections. No further appeal was preferred from this order and hence, it attained finality. While the learned counsels have not contested this issue, it was necessary for us to delve into the reason and principle behind selecting this date and to settle the position of law on the applicability of Forasol (supra) under the 1996 Act. 11. Conversion of Deposited Amounts: The primary contention by the learned counsels was regarding the proper date to determine the exchange rate to the extent of Rs. 8 crores that was deposited in the court pursuant to certain orders. The learned counsels have both referred to decisions by the Delhi High Court on this point. Mr. Mishra heavily relied on Voith Hydro (supra), where the arbitral award was partly paid against bank guarantees under a Niti Ayog circular, before the objections were finally decided. The High Court here held that the paid amount stood converted as on the date of payment as it was received by the award-holder and the exchange rate increased by the time the objections were finally decided. On the other hand, Mr. Mahajan has relied on Karam Chand Thapar (supra), where again a deposit of some p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excess of Rs. 4 crores. It also directed that 10% interest p.a. would be payable by Renusagar on the balance of the decretal amount in case the appeal is dismissed, and the same interest would be payable by General Electric on the amount withdrawn by it if the appeal is allowed. Pursuant to this order, Renusagar deposited Rs. 9.69 crores on 20.03.1990, which was withdrawn by the respondent on furnishing necessary bank guarantee. In a subsequent order, this Court directed a further deposit of Rs. 1 crore and bank guarantee of Rs. 1.92 crores to be furnished by Renusagar. The deposit was made on 03.12.1990, which was also withdrawn51. However, General Electric contended that it was unable to use a large part of this amount as it had not received permission from the Reserve Bank of India to convert the same into US dollars due to the pendency of the appeals. 11.4 After rejecting various submissions by the appellant regarding the enforceability of the award, this Court decided the question of the amount in Indian rupee that was to be paid. The relevant portion on this point is extracted: 141. As indicated earlier, in pursuance to the orders of this Court dated February 21, 1990, Renus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the pendency of these appeals will have to be adjusted against the said decretal amount and the present liability of Renusagar under this decision has to be determined accordingly. Calculating on this basis the amount payable by Renusagar under the decree in terms of U.S. dollars is: Amount awarded by the Arbitral Tribunal : 12,215,622.14 Interest on US $ 2,716,914.72 (the total amount awarded under item Nos. 1, 3 and 5) @ 8% per annum from 1-4-1986 to 15-10- 1986 in terms of the award : 117,733.00 12,333,355.14 Less: Amount paid by Renusagar in pursuance of the orders dated 21-2-1990 and 6-11-1990 during the pendency of the appeals in this Court 6,289,800.00 6,043,555.14 143. In accordance with the decision in Forasol case 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. 11.5 From the above, it is clear that the Court adjusted the amounts deposited during the pendency of the proceedings and against security by converting them to US dolla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not stand converted on the date of its deposit. 15. A similar logic underscores the statutory provisions in Order 21, Rule 1 and Order 24 of the Code of Civil Procedure, 190852 to determine whether interest will continue to operate on an amount deposited before a court. It would be relevant for us to briefly discuss the law on this point: 15.1 A constitution bench of this Court in Gurpreet Singh v. Union of India53 extensively discussed the rules governing interest calculation when the defendant/ judgment-debtor deposits some part of the amount. Order 24 governs deposits at the pre-decretal stage and Order 21, Rule 1 at the post-decretal stage.54 The essence of these provisions is that on any amount deposited into the court, interest shall cease to run from the date when the depositor serves a notice to the plaintiff/decree-holder. Similarly, when payment is tendered to the decree-holder outside the court, interest ceases on such amount even if the payment is refused.55 15.2 Order 21, Rule 1 embodies a rule of prudence that once the amount is tendered to the decree-holder by the judgmentdebtor, whether in the form of a court deposit or other forms of payment such as demand draf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in one year. It is in the nature of the compensation allowed by law or fixed by parties, for use or forbearance or damage for its detention. In the context of the present case, interest would be the compensation payable by the appellant to the respondent, for the retention or deprivation of use of money. Therefore, once the money was paid to the respondent, interest as compensation for deprivation of use of money will not arise. (emphasis supplied) 15.4 Therefore, the ability of the decree-holder to access and use the money in a manner he deems fit was considered by this Court while deciding the issue. 15.5 Here, the Court also differentiated P.S.L. Ramanathan Chettiar (supra), which has also been relied on by the respondent in the present matter, and another decision by this Court in Delhi Development Authority v. Bhai Sardar Singh and Sons58. P.S.L. Ramanathan Chettiar (supra) holds that a deposit is only a way to obtain a stay on execution and does not pass title to the decreeholder, and hence, is not in satisfaction of a decree. The decreeholder in Delhi Development Authority (supra) was not permitted to withdraw the deposited amount and hence, interest was calculated on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against it are finally decided. Therefore, as per the Act and the principle in Forasol (supra), the relevant date for determining the conversion rate of foreign award expressed in foreign currency is the date when the award becomes enforceable. ii. When the award debtor deposits an amount before the court during the pendency of objections and the award holder is permitted to withdraw the same, even if against the requirement of security, this deposited amount must be converted as on the date of the deposit. iii. After the conversion of the deposited amount, the same must be adjusted against the remaining amount of principal and interest pending under the arbitral award. This remaining amount must be converted on the date when the arbitral award becomes enforceable, i.e., when the objections against it are finally decided. 21. As per these conclusions, the first deposit of Rs. 7.5 crores must be converted as on the date of deposit being 22.10.2010. The second deposit of Rs. 50 lakhs as well as the remaining amount due under the award must be converted when the objections proceedings attained finality on 01.07.2014. The Executing Court, being the Additional District Judge cum Commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of the application, produce before the court (a) the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made; (b) the original agreement for arbitration or a duly certified copy thereof; and (c) such evidence as may be necessary to prove that the award is a foreign award. (2) If the award or agreement to be produced under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India. [Explanation. In this section and in the sections following in this Chapter, Court means the High Court having original jurisdiction to decide the questions forming the subject-matter of the arbitral award if the same had been the subject-matter of a suit on its original civil jurisdiction and in other cases, in the High Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.] 14 Section 48 reads: 48. Conditions for enforcement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the dispute.] (3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it 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 give suitable security. 15 Section 50 reads: 50. Appealable orders. (1) [Notwithstanding anything contained in any other law for the time being in force, an appeal] shall lie from the order refusing to (a) refer the parties to arbitration under section 45; (b) enforce a foreign award under section 48, to the court authorised by law to hear appeals from such order. (2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. 16 Section 51 reads: 51. Saving. Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted. 17 Section 52 reads: 52. Chapter II not to app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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