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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 ..... have formulated twin principles: First, following the principle in Forasol v. Oil and Natural Gas Commission1, the date when the arbitral award becomes enforceable shall be the date for conversion. Under the Arbitration and Conciliation Act, 19962 this date is when the objections against the award are dismissed, and award attains finality. Second, in the event that the award amount or part of it is deposited in court pending objections, enabling withdrawal by the decree holder, that date of such deposit shall be the relevant date for conversion as per the principle in Renusagar Power Co Ltd v. General Electric Co3. Before we consider the submissions of the counsels representing the parties, followed by our reasons and decision, we will refer to the relevant facts of the case. 2. Facts: The relevant facts are that the appellants are Indian companies and the respondent is a Croatian company. The parties entered a contract for the design, engineering, manufacturing, and supply of two generators by the respondent. Certain disputes arose between them that were referred to arbitration before the International Chamber of Commerce4, Paris. The three-member arbitral tribunal passed its aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r thereon would obviously be passed by the Executing Court after the conclusion of the proceedings under Section 48." 2.2 In accordance with the above, the appellants deposited Rs. 7.5 crores with the Executing Court on 22.10.2010. 2.3 The Trial Court dismissed the objections filed under Section 48 by order dated 02.04.2011. The appellants filed a revision, which the High Court admitted by order dated 03.06.2011. By this order, the High Court also stayed the operation of the Trial Court order dismissing objections, subject to the appellants depositing a further amount of Rs. 50 lakhs, in addition to Rs. 7.5 crores, with the Executing Court. The Court directed that the amount shall be disbursed to the successful party on the final adjudication of this lis. It also rejected the respondent's prayer for deposit of the amount in euros. Pursuant to this order, the appellants deposited Rs. 50 lakhs on 15.07.2011. Subsequently, the revision came to be dismissed by the High Court on 01.07.2014, by which the award attained finality as this order was not challenged any further. 2.4 In the execution proceedings, the Trial Court by order dated 24.08.2016 permitted the respondent to withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the relevant date for conversion is 01.07.2014. 2.7 While issuing notice on the special leave petition filed by the appellant on 10.09.20189, this Court confined the issue to determining whether the foreign exchange rate as on 15.10.2010 would apply to the deposit of Rs. 8 crores. 3. Submissions: Learned senior counsel Mr. Pinaki Mishra appeared on behalf of the appellants. Initially, he submitted that 01.07.2014 would not be the relevant date for conversion for the entire amount and argued for using the exchange rate on 02.04.2011, when the Trial Court dismissed objections under Section 48. However, he later restricted his submissions to the exchange rate that applies when the amount of Rs. 8 crores was deposited by the appellants on 22.10.2010 as per the order dated 15.10.2010. The crux of his argument is that the deposited amount stands converted as on the date of its deposit, and this amount then cannot be converted again as per the exchange rate prevailing on 01.07.2014. He has submitted that the High Court passed an order dated 15.10.2010 directing the appellants to deposit Rs. 7.5 crores on the consent of both parties, and also permitted the respondent to withdraw this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O.R.M.P.R.M. Ramanathan Chettiar10 where it was held that the judgment debtor depositing a sum in court during the pendency of the appeal does not pass the title and vest the money with the decree-holder. The decree-holder may withdraw the amount only on furnishing security, which means that the payment is not in satisfaction of the decree. Further, the judgment debtor can proceed against the security in case he succeeds in the appeal. Rather, the purpose of the deposit is to obtain a stay of execution and to put the money beyond the reach of the parties pending the disposal of the appeal. On this basis, Mr. Mahajan submitted that the deposit of Rs. 8 crores during the pendency of the objections under Section 48 does not pass the title of this amount to the respondent and such deposit was not under the arbitral award as the award can be deemed to be a decree only on 01.07.2014 when all the objections to the award stood dismissed. Hence, this is the relevant date for conversion. 3.3 As per the calculation sheet submitted by the respondent, the exchange rate as on this date is 1 euro = Rs. 82.21 and this rate must be used for converting the entire arbitral award and interest. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l awards and judgments where the decretal amount is expressed in a foreign currency. The seminal case that first decided this question was Forasol v. ONGC (supra). Forasol was a French company that was awarded a tender for structural drilling of oil for exploration by ONGC. Pursuant to certain disputes that arose between the parties, the matter was referred to arbitration and on 21.12.1974, an arbitral award was passed in Forasol's favour where the amount was expressed in French francs. This award was made under the Arbitration Act, 1940. The Court held that the award can be enforced either in foreign currency or in Indian rupee. The principles for determining conversion to Indian rupee are as follows: 5.1 Where the contract provides for a rate of exchange, the same must be used to convert the amount in accordance with the wording of the contractual clause. In this case, article IX-3.1 of the contract provided for the exchange rate of FF 1.033 = Re. 1.000, which the Court held as applying to only 20% of the fees and charges computed in French francs based on contractual interpretation.20 Further, the arbitral award provided for an enhanced rate of conversion of FF 1.000 = Rs. 1.51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign currency. However, for the purpose of payment of such amount, the limitations and restrictions under the Foreign Exchange Regulation Act, 1973 (that was in force at the time) must be considered. If permission is not granted by the authorities to pay the decretal amount in foreign currency, the amount would have to be converted to Indian rupees for payment of an equivalent amount. The date of conversion becomes relevant here, as the "court must select a date which puts the plaintiff in the same position in which he would have been had the defendant discharged his obligation when he ought to have done, bearing in mind that the rate of exchange is not a constant factor but fluctuates, and very often violently fluctuates, from time to time."28 These are the guiding principles and considerations for the Court to determine the relevant date, which are apposite even today. 5.5 The Court then undertook a detailed examination of each of the 6 dates that it set out earlier and held that the date of the decree (the third option) is the most appropriate amongst them. The Court adopted the approach of eliminating other possible dates, on the following grounds: i. The date when the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft 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, the Court was of the opinion that the date of the judgment/decree is the most appropriate.34 It rejected the date of the arbitral award as the proper date while observing that the Jugoslavenska case (supra), where this date was used, was doubted even by the House of Lords in Miliangos (supra). If the law laid down in Miliangos (supra) were to be applied to arbitral awards, the date of conversion would be when the court grants leave under Section 26(1) of the Arbitration Act, 1950 (UK) to enforce such award in the same manner as a judgment or to the same effect.35 Further, noting the differences between the statutory scheme for enforcement of foreign arbitral awards in the UK and in India, it held that the Jugoslavenska case (supra) will not apply in the Indian context considering the procedure under Section 17 is different from the procedure under English law.36 Section 17 of the Arbitration Act, 194037 required a judgment and decree to give an award the status of a decree, i.e., making it a rule of court, for the award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 complaint for payment of an insurance claim due to the damage of a printer in transit. This Court did not cite Forasol (supra) but used the date of its judgment as the proper date for conversion of the cost of the printer that was expressed in Singaporean dollars. In Meenakshi Saxena v. ECGC Limited44, again was a consumer complaint for payment under an insurance contract for loss suffered during export of goods, the Court noted that the contract provided for a date on which the exchange rate must be determined and followed Forasol (supra) to hold that this is the proper date. 7.1 In certain other cases, the principle in Forasol (supra) has been considered but not applied due to the peculiar facts of those cases. For example, in cases of motor accident deaths where the deceased was earning in foreign currency, the Court has refused to use the date of the judgment as the proper date and has instead used the date of filing the claim as the claims in these cases were filed in Indian rupee and the Tribunal also decided the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the award was held to be the relevant date. 9.4 In Voith Hydro v. NTPC Limited49, the award debtor had paid some part of the arbitral award amount during the pendency of proceedings to set aside the award. It paid 75% of the amount on 06.11.2018, against bank guarantees by the award holder, in accordance with a Niti Aayog Circular. Subsequently, this Court dismissed the SLP in the 22.09.2020. The High Court held that the exchange rate as on 06.11.2018 would apply insofar as 75% of the deposit is concerned as the claimant had received this partpayment and the exchange rate on 22.09.2020 was higher than on 06.11.2018. Relying on Forasol (supra), Renusagar (supra), and Fuerst Day Lawson (supra), it held that the exchange rate on 22.09.2020 would apply to the remaining amount. 9.5 In Karamchand Thapar & Bros. (Coal Sales) Ltd. v. MMTC Ltd.50, the date on which the arbitral award attained finality (when the SLP in the Sections 34 and 37 proceedings was dismissed) was determined as the relevant date for the exchang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 part of the amount was made, albeit after the final decision on objections. Here the High Court held that the date on which the SLP in the objections was dismissed would be the proper date. 11.1 In the present case, it is important to note the terms on which the two deposits of Rs. 7.5 crores and Rs. 50 lakhs were made. From the order of the High Court dated 15.10.2010, it is clear that such order for deposit of Rs. 7.5 crores and for furnishing a bank guarantee of an Indian bank for the release of the deposit was made in accordance with the consent of the parties. Mr. Mahajan's submission that the respondent did not consent to the deposit hence cannot be accepted. The further deposit of Rs. 50 lakhs was made pursuant to an interim order of the High Court dated 03.06.2011, which stayed the Trial Court order dated 02.04.2011 and directed the deposit. However, unlike the previous order, neither was this order passed on the consent of the parties nor did it permit the respondent to withdraw the money dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt 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, Renusagar deposited a sum of Rs 9,69,26,590 on March 20, 1990 and a further amount of Rs 1,00,00,000 was deposited by Renusagar in pursuance to the order dated November 6, 1990 on December 3, 1990. These amounts have been withdrawn by General Electric. The question is how and at what rate the said amount should be adjusted against the decretal amount. It is not disputed that on the date when the said deposits were made by Renusagar and were withdrawn by General Electric, 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 the permission to General Electric to remit the amount by converting the same into U.S. dollars on account of the pendency of these appeals in this Court... Shri Shanti Bhushan has, therefore, submitted that the amounts deposited by Renusagar should be converted from Indian rupees int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge (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 dollars as on the date of their deposit. It applied the date of its own judgment only for converting the remaining portion of the award in accordance with Forasol's (supra) ruling that the date of decree or judgment, after exhausting all remedies, is the proper date. It rejected the respondent's argument regarding its inability to convert the amount on the grounds that a decree in foreign currency can be validly satisfied by payment in Indian rupee and the respondent did not move the Court for necessary clarification. 12. The facts in this case are similar to Renusagar (supra) for an analogy to be drawn. Here as well, the deposit was made during the pendency 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 case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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 draft or cheque, the judgment-debtor cannot be made liable to then pay interest on such amount.56 15.3 The rationale for this rule has been explained in Nepa Limited v. Manoj Kumar Agrawal57 through a similar logic of the decree-holder being able to benefit from the deposited amount. In this case, the award-debtor deposited 50% of the awarded amount before the executing court to obtain a stay on the execution proceedings of the arbitral award during the pendency of appeal under Section 37 of the 1996 Act. This amount was withdrawn by the award holder, and the issue before this Court was whether interest is payable on the deposited amount even after the date of deposit. The Court held as follows: "21. In the present case, the appellate court, on the appeal preferred under Section 37 of the Act did grant stay, subject to the condition that the appellant would deposit 50% of the amount. Rs. 7,78.280/- was deposited by the appellant on 05.11.2001. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 same. The Court in Nepa Limited (supra) however held that these cases do not apply in its facts as the respondent here was permitted to withdraw the deposited sum and did so. Hence, the Court instead relied on the ability of the respondent to use the deposited money as it deems fit. 16. These cases demonstrate that once there is a deposit by the award debtor and the award holder is permitted to withdraw the same, even if such withdrawal is conditional and subject to the final decision in the matter, the court must consider that the award holder could access and benefit from such deposit. It is then the burden of the award holder to furnish security, as required by the court's orders, to utilise the amount or to make an application for modification of the condition if it is unable to fulfil the same. 17. In furtherance of the above, we therefore reiterate that the deposit of Rs. 7.5 crores must be converted as on the date of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 Commercial Court, must determine the amount payable by taking into account the exchange rate as on 01.07.2014. 22. In light of the above, we partly allow the appeal, and set aside the findings of the High Court in the impugned judgment to the extent that Forasol (supra) does not apply under the 1996 Act and that the exchange rate on 01.07.2014 must be used for converting the entire arbitral award and interest. 23. Pending applications, if any, stand disposed of. 24. No order as to costs. FOOT NOTE 1 1984 Supp SCC 263. 2 Hereinafter 'the Act'. 3 1994 Supp (1) SCC 644. 4 Hereinafter "ICC". 5 In CR No. 1827 of 2017 (O&M), Punjab and Haryana High Court (hereinafter "impugned judgment"). 6 2014 SCC OnLine Del 3348. 7 SLP No. 27041/2014, order dated 21.11.2014. 8 Section 49 of the Act reads : "49. Enforcement of foreign awards.-Where the Court is satisfied that the foreign award is enforceable under this Chapte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 of foreign awards.-(1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that- (a) the parties to the agreement referred to in section 44 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 (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, 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 apply.-Chapter II of this Part shall not apply in relation to foreign awards to which this Chapter applies." 18 See Fuerst Day Lawson v. Jindal Exports Limited, (2001) 6 SCC 356, paras 30 and 31. 19 ibid. 20 Forasol (supra), para 16. 21 ibid, paras 17-22. 22 ibid, paras 24-25. 23 ibid, para 39. 24 Jugoslavenska Oseanska Plovidba v. Castle Investment Co. Inc., [1973] 3 All E.R. 498. 25 In re United Railways of the Havana and Regia Warehouses, Ltd.,[1959] 1 All E.R. 214 (CA). 26 Schorsch Meier GmbH v. Hennin, [1975] 1 All E.R. 152 27 Miliangos v. George Prank (Textiles) Ltd., 1976 AC 443. 28 Forasol (supra), para 40. 29 ibid, para 41. 30 ibid, para 42. 31 ibid, para 43. 32 ibid, paras 44-46. 33 ibid, paras 47-52. 34 ibid, para 53. 35 ibid, paras 61-62. 36 ibid, par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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