Delhi High Court
Trammo Ag vs Mmtc Limited on 18 February, 2019
$~11
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 18th February, 2019
+ EX.P. 164/2015 and EX.APPL.(OS) 1229/2015
TRAMMO AG ..... Decree Holder
Through: Mr. Rajiv Nayar, Sr. Advocate with
Mr. Omar Ahmad and Mr. Nirman,
Advocates (M: 9873274989).
versus
MMTC LIMITED ..... Judgement Debtor
Through: Mr. Debal Kumar Banerji, Sr.
Advocate with Ms. Suman Yadav and
Mr. Ayush Dhawan, Advocates ( M:
9910044138).
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)
1. The present petition seeks execution of award dated 25 th November,
2014 passed under the aegis of Indian Council of Arbitration. The relevant
portion of the said award is as under:-
"63. Based on the foregoing, the Tribunal hereby makes
issues and publishes this Final Award as follows:
a. The Respondent shall pay the Claimant the sum of
US$ 3,465,000 with interest thereon computed at the rate
of 12% per annum from 4th of January 2012 up to the
date of this Award. From the day after the date of this
Award up to the date of payment interest shall be
payable at the rate of 18% per annum;
b. The Respondent shall pay the Claimant the sum of
US$ 8,252.50 with interest thereon computed at the rate
of 12% per annum from 4th January 2012 up to the date
of this Award. From the day after the date of this Award
up to the date of payment interest shall be payable at the
rate of 18% per annum;
c. The Respondent shall pay the Claimant the sum of
USD 103,146.58 being legal costs.
d. The Respondent shall pay the fees and expenses of the
Tribunal as follows:
i. The Tribunal's travel costs and expenses of
the sum of USD 11,801.84;
ii. The Tribunal's fees amounting to the total
of Indian Rupees 4,473,000.
Where any such fees and expenses have been paid by the
Claimant, the Respondent shall fully reimburse the
Claimant for the same.
e. The Respondent shall pay to the ICA the sum of Indian
Rupees USD 1,157,000 towards the administrative fees
of the ICA. Where any such fees have been paid by the
Claimant, the Respondent shall fully reimburse the
Claimant for the same.
f. The Respondent shall pay the Claimant the sum USD
51,999.84 towards payment of Lloyd Michaux's costs
and Claimant's witnesses and representatives travel
expenses costs;
g. The Respondent shall pay the Claimant the sum of
Indian Rupees 526,276 towards Claimant's expense for
hotel and local travel;
h. The Respondent shall bear the whole of its own legal
fees and costs in connection with the Arbitration; and
i. All other claims of the Claimant and the claims of the
Respondent are dismissed."
2. A challenge to the award was made under Section 34 of the Indian
Arbitration Act, 1996 however, the same was dismissed vide judgement
dated 11th March, 2015.
3. The present execution petition was filed on 21st April, 2015 upon the
dismissal of the Section 34 petition.
4. Thereafter, MMTC preferred an appeal to the Ld. Division Bench of
this Court, which was dismissed vide judgement dated 22 nd January, 2016.
MMTC, thereafter preferred a Special Leave Petition to the Supreme Court,
which was again dismissed on 14th November, 2018. A review petition was
also filed by MMTC before the Supreme Court, which is now stated to have
been dismissed on 12th February, 2019.
5. The award, which has finally been upheld by the Supreme Court is
sought to be executed by way of the present petition. The only question is in
respect of the foreign exchange rate to be applied as the award is in US
dollars. The issue to be considered is - What is the foreign exchange rate to
be applied? Whether the same should be calculated on the basis of
conversion rate on the date of the award or on the date of dismissal of the
Section 34 petition or on the date of dismissal of the SLP or on the date of
dismissal of the review petition or finally on the date when the execution
petition is being disposed of.
6. Ld. counsel for the Decree Holder relies upon the judgement of the
Supreme Court in Forasol versus Oil and Natural Gas Commission, 1984
(supp) SCC 263, and states that Forasol is clear and categorical. It lays
down the principle that the date of final dismissal or decision would govern
the rate of exchange that should be adopted for conversion. He relied upon
paragraphs 24, 41, 42, 43, 44, 53 & 70 of Forasol.
7. He further relies upon two judgements of this Court in Furest Day
Lawson Limited v Jindal Exports Limited (2012) 194 DLT 439 and
Progetto Grano S.P.A. v Shri Lal Mahal Limited Ex. P. No. 52/2012,
(Decided on 29th May, 2014). In these decisions, the date of dismissal of the
SLP against the order rejecting the objections under Section 48 of the 1996
Act was taken as the date of conversion.
8. On the other hand, Ld. counsel appearing for the Judgment Debtor has
submitted a calculation sheet to quantify the amount payable. The various
options of dates have also been set out in the said calculation sheet and it is
submitted by the Ld. counsel that the date of disposal of the petition under
Section 34 of the Act, i.e. 11th March, 2015 should be taken as the date for
applying the foreign exchange rate for conversion. It is further pointed out
by Ld. senior counsel that the decree holder itself had quantified the award
as being Rs. 32 crores on the date of award, by paying stamp duty on the
award to the tune of Rs.3,50,000/-. Since the present execution petition
seeks enforcement of the said award, the calculation should be by taking Rs
32 crores as the awarded amount in favour of the decree holder.
9. It is further submitted that the judgements relied upon by the decree
holder are in respect of foreign awards, which are not automatically
enforceable in India. They would be considered as decrees only when the
objections against the award are finally decided. Per contra, a domestic
award attains the flavour of a decree, if there is no challenge to the same and
the time for challenge to the award has expired. Where a challenge is made,
the relevant date is the date when the same is rejected.
10. Ld. counsel for the Decree Holder submits that the contract itself was
in dollars and the Decree Holder, being a foreign company, preferred to
obtain the decretal amount in dollars.
11. This court has heard the counsels for the parties. In this execution
petition the only question that needs to be decided is as to what should be
the conversion rate which is to be applied for execution of the decree.
12. As can be noticed above, the award has not prescribed the rate of
conversion but has only granted to the Claimant/Decree Holder a sum of
USD 3,465,000 (excluding interest, demurrage and costs). The challenge to
the award has failed finally. The various dates that could be applicable for
applying the rate of conversion are:
1) Rate as on the date of award i.e. 25th November, 2014;
2) Rate as on the date of disposal of the Section 34 petition i.e.
11th March, 2015;
3) Rate as on the date of disposal of the appeal by the Division
Bench i.e. 22nd January, 2016;
4) Rate as on the date of disposal of the SLP i.e. 14th November,
2018 ;
5) Rate as on the date of dismissal of the review petition i.e. 12th
February, 2019;
13. The Decree Holder submits that it should be the last of these dates i.e.
12th February, 2019.
14. The issue as to what should be the relevant date for the conversion
rate to be applied to awards or decrees made in a foreign currency was
considered by the Supreme Court in Forasol (supra). The Supreme Court
enumerated the various dates that could be considered, in paragraph 24 and
25 as under:
"24. In an action to recover an amount payable in a
foreign currency, five dates compete for selection by the
Court as the proper date for fixing the rate of exchange
at which the foreign currency amount has to be
converted into the currency of the country in which the
action has been commenced and decided. These dates
are:
(1) the date when the amount has become due and
payable;
(2) the date of commencement of the action;
(3) the date of the decree;
(4) the date when the court orders execution to issue;
and
(5) the date when the decretal amount is paid or realised.
25. In a case where a decree has been passed by the
Court in terms of an award made in a foreign currency a
sixth date also enters the competition, namely, the date of
the award. The case before us is one in which a decree in
terms of such an award has been passed by the Court."
15. Paragraph 41 onwards, the Supreme Court observes that taking the
date when the amount became due and payable, would be inequitable. The
second date i.e. date of commencement of action was also rejected. Insofar
as the date of decree is concerned, the Supreme Court observed as under:
"43. We will now consider the feasibility of selecting the
third date, namely, the date of the decree. A decree
crystallizes the amount payable by the defendant to the
plaintiff and it is the decree which entitles the judgment-
creditor to recover the judgment debt through the
processes of law. An objection which can, however, be
taken to selecting this date is that the decree of the trial
court is not the final decree for there may be appeals or
other proceedings against it in superior courts and by the
time the matter is finally determined, the rate of
exchange prevailing on that date may be nowhere near
that which prevailed at the date of the decree of the trial
court. To select the date of the decree of the trial court as
the conversion date would, therefore, be to adopt as
unrealistic a standard as the "breach date". This
difficulty is, however, easily overcome by selecting the
date when the action is finally disposed of, in the sense
that the decree becomes final and binding between the
parties after all remedies against it are exhausted. This
can be achieved by the court which hears the appeal
providing that the date of its decree or other proceedings
in which the decree is challenged would be the date for
conversion of the foreign currency sum into Indian
rupees in cases where the decree has not been executed
in the mean time. The real objection to selecting this
date, however, is that a money decree and the payment
by the judgment debtor of the judgment debt under it are
two vastly different matters widely separated by
successive execution applications and objections thereto
unless the judgment-debtor chooses to pay up the
judgment debt of his own accord which is generally not
the case. In the vast majority of cases a money decree is
required to be enforced by execution."
16. After holding so, the Supreme Court proceeds to consider as to
whether the proper date of conversion would be the date the Court orders
execution. The Supreme Court, in paragraph 46, after taking into
consideration the various steps that may be required to be taken by the Court
to execute the decree, has observed as under:
"46. The above difficulties would rule out the
taking of the date when the court grants an application
for execution as the date of conversion and would
make inapplicable to our courts the Rule laid down in
the Miliangos case"
17. Thereafter, the Supreme Court considered the question as to whether
the date of payment would be the relevant date for considering the
applicable rate of conversion. This, according to the Court, would be writ
with practical and procedural difficulties, including those in respect of
payment of court fee, pecuniary limit and execution. On the basis of all
these aspects, the Supreme Court held as under:
"48.......These difficulties would rule out both the
date when the court orders execution to issue and the
date of payment of the decretal debt to be taken as the
date of conversion."
18. Thus, the Supreme Court ruled out the date of execution of the order
as the date of payment for being the date when conversion is to be applied.
Further, since execution has to be for a specific sum „due upon the decree‟,
as per Order 21 Rule 11(2)(g) CPC, the Court observed as under:
"52. For the above reason, it is not possible for us
to accept the date of payment or realization of the
decretal debt as the proper date for the rate of
conversion.
53. This then leaves us with only three dates from
which to make our selection, namely, the date when the
amount became payable, the date of the filing of the
suit and the date of the judgment, that is, the date of
passing the decree. It would be fairer to both the
parties for the Court to take the latest of these dates,
namely, the date of passing the decree, that is, the date
of the judgment."
19. Thus, in paragraph 53, only three dates were left for consideration as
relevant i.e. the date when the amount became payable, the date of filing of
the suit and the date of judgment i.e. date of passing of the decree. In case
of suits, therefore, the Supreme Court held that it would be fair to both the
parties to take the last of these dates i.e. the date of passing of the decree as
the date of judgment. The Supreme Court then reversed the conclusion of
the Delhi High Court, which held that in case of an award, which directs the
payments of a sum in foreign currency, the proper date for conversion of
foreign currency would be the date of the award. After considering the
various judgments of the courts in UK, the Supreme Court held that the
scheme of enforcement under the English Arbitration Act of 1950 and that
under the Arbitration Act of 1940 in India being different, the judgment in
Jugoslavenska Oceanska Plovidba v Castle Investment Co. Inc., (1973) 3
All ER 498 was not applicable. Since the provisions for enforcement of an
award under the English Arbitration Act of 1950 and the Foreign Awards
(Recognition and Enforcement), 1961 in India are different, the Supreme
Court held that in view of Section 17 of the Arbitration Act, 1940, the date
when the Court upholds the award becomes the date of decree. Paragraph 66
of the judgment is set out herein below:
"66. Under Section 17 of our Arbitration Act,
judgment is to be pronounced "according to the award".
The marginal note to the section speaks of "judgment in
terms of award". Under Section 26(1) of the English Act,
once leave is given, an award becomes enforceable in the
same manner as a judgment or order "to the same
effect". The words "to the same effect" were interpreted
in the Jugoslavenska case [(1973) 3 All ER 498 : 1974
QB 292 : (1973) 3 WLR 847 (CA)] not as meaning "in
the same terms" but as meaning having "the same
effect", that is, as having the same effect as a judgment
or order given in an action brought on the award.
Granting leave under Section 26(1) of the English Act
and pronouncing judgment according to the award and
passing a decree under Section 17 of our Act, therefore,
mean different things and have different results. A
judgment according to the award under Section 17 of our
Act will speak only from the date of the judgment which
will not be the case under Section 26(1), for while in the
first case what will be enforceable by the processes of
law, namely, execution, will be the decree passed in
terms of the award, in the second case it will be the
award itself, unless the applicant desires to have
judgment entered in terms of the award which he is not
required to do as pointed out above."
20. The Supreme Court then rejected the ruling in the Jugoslavenska
(supra) in the following terms:
"69. For the reasons set out above, we are of the
opinion that the rule in the Jugoslavenska case [(1973)
3 All ER 498 : 1974 QB 292 : (1973) 3 WLR 847 (CA)]
cannot be applied to this country and the fact that a
decree is in terms of an award for a sum of money
expressed in a foreign currency makes no difference to
the date to be taken by the court for converting into
Indian currency the foreign currency sum directed to
be paid under the award and that such date should
also be the date of the decree."
21. Thereafter, the Supreme Court considered the scheme under the
Arbitration Act, 1940 whereby a suit was required to be filed for
enforcement of the award and observed as under:
"70. It would be convenient if we now set out the
practice, which according to us, ought to be followed in
suits in which a sum of money expressed in a foreign
currency can legitimately be claimed by the plaintiff and
decreed by the court. It is unnecessary for us to
categorize the cases in which such a claim can be made
and decreed. They have been sufficiently indicated in the
English decisions referred to by us above. Such instances
can, however, never, be exhausted because the law
cannot afford to be static but must constantly develop
and progress as the society to which it applies, changes
its complexion and old ideologies and concepts are
discarded and replaced by new. Suffice it to say that the
case with which we are concerned was one which fell in
this category. In such a suit, the plaintiff, who has not
received the amount due to him in a foreign currency,
and, therefore, desires to seek the assistance of the court
to recover that amount, has two courses open to him. He
can either claim the amount due to him in Indian
currency or in the foreign currency in which it was
payable. If he chooses the first alternative, he can only
sue for that amount as converted into Indian rupees and
his prayer in the plaint can only be for a sum in Indian
currency. For this purpose, the plaintiff would have to
convert the foreign currency amount due to him into
Indian rupees. He can do so either at the rate of
exchange prevailing on the date when the amount
became payable for he was entitled to receive the amount
on that date or, at his option, at the rate of exchange
prevailing on the date of the filing of the suit because
that is the date on which he is seeking the assistance of
the court for recovering the amount due to him. In either
event, the valuation of the suit for the purposes of court
fees and the pecuniary limit of the jurisdiction of the
court will be the amount in Indian currency claimed in
the suit. The plaintiff may, however, choose the second
course open to him and claim in foreign currency the
amount due to him. In such a suit, the proper prayer for
the plaintiff to make in his plaint would be for a decree
that the defendant do 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 on the date of the filing of the suit or
the date nearest or most nearly preceding such date,
stating in his plaint what such rate of exchange is. He
should further give an undertaking in the plaint that he
would make good the deficiency in the court-fees, if any,
if at the date of the judgment, at the rate of exchange
then prevailing, the rupee equivalent of the foreign
currency sum decreed is higher than that mentioned in
the plaint for the purposes of court-fees and jurisdiction.
At the hearing of such a suit, before passing the decree,
the court should call upon the plaintiff to prove the rate
of exchange prevailing on the date of the judgment or on
the date nearest or most nearly preceding the date of the
judgment. If necessary, after delivering judgment on all
other issues, the court may stand over the rest of the
judgment and the passing of the decree and adjourn the
matter to enable the plaintiff to prove such rate of
exchange. The decree to be passed by the court should be
one which orders the defendant to pay to the plaintiff the
foreign currency sum adjudged by the court subject to
the requisite permission of the concerned authorities
under the Foreign Exchange Regulation Act, 1973, being
granted, and 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 equivalent of such foreign currency
sum converted into Indian rupees at the rate of exchange
proved before the court as aforesaid. In the event of the
decree being challenged in appeal or other proceedings
and such appeal or other proceedings being decided in
whole or in part in favour of the plaintiff, the appellate
court or the court hearing the application in the other
proceedings challenging the decree should follow the
same procedure as the trial court for the purpose of
ascertaining the rate of exchange prevailing on the date
of its appellate decree or of its order on such application
or on the date nearest or most nearly preceding the date
of such decree or order. If such rate of exchange is
different from the rate in the decree which has been
challenged, the court should make the necessary
modification with respect to the rate of exchange by its
appellate decree or final order. In all such cases,
execution can only issue for the rupee equivalent
specified in the decree, appellate decree or final order,
as the case may be. These questions, of course, would not
arise if pending appeal or other proceedings adopted by
the defendant the decree has been executed or the money
thereunder received by the plaintiff."
22. However, in respect of arbitration the specific observations of the
Court are as under:
"71. Turning now to arbitrations, 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. 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 currency should be converted in the
events mentioned above. This may be done by the
arbitrators or umpire taking either the rate of exchange
prevailing on the date of the award or the date nearest or
most nearly preceding the date of the award or by
directing that the rate of exchange at which conversion is
to be made would be the date when the court pronounces
judgment according to the award and passes the decree
in terms thereof or the date nearest or most nearly
preceding the date of the judgment as the court may
determine. If the arbitrators or umpire omit to provide
for the rate of conversion, this would not by itself be
sufficient to invalidate the award. The court may either
remit the award under Section 16 of the Arbitration Act,
1940, for the purpose of fixing the date of conversion or
may do so itself taking the date of conversion as the date
of its judgment or the date nearest or most nearly
preceding it, following the procedure outlined above for
the purpose of proof of the rate of exchange prevailing
on such date. If, however, the person liable under such
an award desires to make payment of the sum in foreign
currency awarded by the arbitrators or umpire without
the award being made a rule of the court, he would be at
liberty to do so after obtaining the requisite permission
of the concerned authorities under the Foreign Exchange
Regulation Act, 1973."
23. From a reading of paragraph 71 it is clear that the Ld. Arbitrator has
the power to make the award for a sum in foreign currency, however, the
rate of exchange at which the sums were awarded in a foreign currency
should be provided in the award itself. If the Ld. Arbitrator failed to provide
the rate of conversion, it would not invalidate the award. The Court has the
option of remitting the award under the 1940 and 1961 Acts or take the rate
of conversion on the day of its judgement or the date nearest or nearly
preceding it. This procedure outlined in paragraphs 70 and 71 of the Forasol
judgment would apply in the context of an award passed in a foreign
currency under 1940 Act. Ld. Counsels for the Decree Holder have also
relied upon Fuerst Day Lawson Limited v Jindal Exports Limited (supra)
and Progetto Grano S.P.A. versus Shri Lal Mahal Limited (supra) Both
these judgments, however, relate to enforcement of a foreign award.
24. In Fuerst Day Lawson, this Court held as under:
"16. In Forasol v. Oil and Natural Gas Commission, the
enforcement proceedings were under the 1940 Act. What
was sought to be enforced was a foreign Award in
French francs. The Court has passed the decree, in terms
of an Award without fixing any date for conversion of
French francs into Indian Rupees. When an application
was filed for execution of the decree, the question that
arose for determination concerned the relevant date for
conversion of the French francs into Indian Rupees. The
Supreme Court held that the date of the decree should be
the relevant date for conversion because it was on that
date that all the objections to the Award were rejected,
the Award was made rule of the Court and a decree
drawn-up.
17. By analogy, under the 1996 Act, the crucial date
would be the date on which the objections to the
enforcement of the foreign Award are finally rejected
and the foreign Award becomes enforceable as such.
That is when "the award should be deemed to be a
decree" under Section 49 of the 1996 Act. Therefore,
under the scheme of 1996 Act, where the enforcement to
the foreign Award is sought, the relevant date for
conversion of the decretal amount expressed in foreign
currency into Indian Rupees would be the date of final
rejection of the objections to the enforcement of the
foreign Award. In the present cases, that date is
undoubtedly 30th August 2012, the date on which the
SLPs filed by the JD were finally dismissed by the
Supreme Court. It was then, in terms of Section 49 of the
1996 Act, that both the foreign Awards became
enforceable and were deemed to be decrees.
25. In Progetto Grano a Ld. Single Judge of this Court held as under:-
"24. It would follow that only after objections filed by
the person opposing the execution of the award are
adjudicated upon by the court, and rejected, the award
would become enforceable. These objections would be
filed under Section 48 of the 1996 Act. In view of the
above there is no merit in the contentions of the judgment
debtor claiming that the date of the Award is the relevant
date. In the present case the date would be date of
dismissal of the appeal by the Supreme Court.
25. The judgment debtor has taken various objections
arguing that the relevant date should be the date of the
Award. I will deal with the said objections.
26. The objection of the judgment debtor that the
judgment of this High Court in the case of Fuerst Day
Lawson Ltd. v. Jindal Exports Ltd. (supra) is per
incuriam, is a contention without merits. In the
judgments of the Supreme Court with the same title
namely Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.
(2001) 6 SCC 356 and Fuerst Day Lawson Ltd. v. Jindal
Exports Ltd. (2011) 8 SCC 333, the Supreme Court had
reiterated that the Award itself would be deemed to be a
decree of the Court. This proposition does not, in any
way, change the fact that decree becomes executable
only after the objections under Section 48 of the 1996 Act
are finally adjudicated upon and thereafter in case of
rejection of the same the Award becomes enforceable
under Section 49 of the said Act.
27. There is also no merit in the second contention of the
judgment debtor that at best, if the arguments of the
decree holder are accepted, it is the date when the
objection under Section 48 of the 1996 Act were
dismissed by this Court, that would be the relevant date
namely, 9.02.2012. Against the said order dated
9.02.2012, the judgment debtor had filed an appeal
before the Supreme Court which was finally disposed of
on 8.07.2013. It is only thereafter that the Award became
enforceable as envisaged under Section 49 of the 1996
Act.
28. In fact, a perusal of the order of this Court dated
8.08.2012 would show that the Supreme Court had
passed certain interim orders. Hence the judgment
debtor could not execute the Award at that stage. It is
only after the disposal of the appeal by the Supreme
Court that the amount deposited in the Court was
directed to be released to the decree holder on
23.09.2013.
29. There is also no merit in the next submission of the
judgment debtor that the relevant date would at best be
9.2.2012, as in the pleadings, written submissions and
calculations as filed on affidavit, the decree holder has
only sought the date of conversion for calculation of
rupee equivalent as on 9.02.2012. The learned counsel
for the decree holder has explained that all these
pleadings which are being referred to by the judgment
debtor were filed before the judgment of the Supreme
Court dated 8.07.2013.
30. Accordingly, I hold that the relevant date for
calculation of the rupee equivalent of the Award amount
to Indian rupees is 8.07.2013."
Thus, in both these cases the date of dismissal of the SLPs was taken as the
final date for conversion.
26. In the present case, the award is a domestic award, though the Decree
Holder/Claimant is a foreign company. The schemes of the 1940 and 1996
Acts are considerably different. Under the 1940 Act, the successful party in
an arbitration would file a suit seeking judgment in terms of the award under
Section 17, and anyone who wished to challenge the award, could file an
application under Section 30 & 33 of the 1940 Act. Under the 1996 Act,
however, once the award is passed, under Section 36 as it stood before the
2015 Amendment, it was enforceable as a decree of the Court in either of the
following two situations.
1) When the time for challenge under Section 34 had expired or
2) The challenge to the award had failed.
27. Section 36, as it stood when the objections under Section 34 were
rejected by a Ld. Single Judge of this Court, read as under:
"36. Enforcement. - Where the time for making an
application to set aside the arbitral award under
section 34 has expired, or such application having
been made, it has been refused, the award shall be
enforced under the Code of Civil Procedure, 1908 (5 of
1908) in the same manner as it were a decree of the
court. "
Post the 2015 Amendment to the 1996 Act, Section 36 reads as under:
"36. Enforcement. - (1) Where the time for making
an application to set aside the arbitral award under
Section 34 has expired, then subject to the provisions
of sub-section (2), such award shall be enforced in
accordance with the provisions of the Code of Civil
Procedure, 1908 (5 of 1908), in the same manner, as
if it were a decree of the court.
(2) Where an application to set aside the arbitral
award has been filed in the Court under Section 34,
the filing of such an application shall not by itself
render that award unenforceable, unless the Court
grants an order of stay of the operation of the said
arbitral award in accordance with the provisions of
sub-section (3), on a separate application made for
that purpose.
(3) Upon filing of an application under sub-section
(2) for stay of the operation of the arbitral award, the
Court may, subject to such conditions as it may deem
fit, grant stay of the operation of such award for
reasons to be recorded in writing;
Provided that the Court shall, while considering the
application for grant of stay in the case of an arbitral
award for payment of money, have due regard to the
provisions for grant of stay of a money decree under
the provisions of the Code of Civil Procedure, 1908
(5 of 1908)"
Thus, the same principles that apply to suits, would apply to arbitral awards,
under the 1996 Act. The award is a decree automatically when the time for
filing objections expires or when the objections are decided finally. Thus, a
domestic award, pre -2015 and post 2015 has the trappings of a decree.
28. The principles in Forasol have also been considered in Renusagar
Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644. In this
case, the Supreme Court held that the date of conversion should be the date
when the award attained the finality. The relevant paragraph of the said
judgment reads as under:
"119. The first date, i.e., the date when the amount
became due and payable, was not accepted by the
Court for the reason that it cannot be said to be just,
fair or equitable because in a case where the rate of
exchange has gone against the plaintiff, the defendant
escapes by paying a lesser sum than what he was
bound to and thus is the gainer by his default while in
the converse case where the rate of exchange has gone
against the defendant, the defendant would be subject
to a much greater burden than what he should bear.
The Court felt that the same criticism would apply to
the second of the dates, namely, the date of the
commencement of the action or suit because suits are
not often disposed of for an unconscionably long time
and if we take into account the time that would be
spent in appeals, further appeals, and revision and
review applications which may be filed, the longevity
of the litigation is doubled, if not tripled, so that none
can with any certainty predict even a probable date for
its termination. As regards the third date, namely, the
date of the decree, the Court observed that a decree
crystallizes the amount payable by the defendant to the
plaintiff and it is the decree which entitles the
judgment-creditor to recover the judgment debt
through the processes of law. Dealing with the
objection that the date of the decree of the trial court is
not final decree for there may be appeals or other
proceedings against it in superior courts and by the
time the matter is finally determined, the rate of
exchange prevailing on that date may be nowhere near
that which prevailed at the date of the decree of the
trial court, it was observed that this difficulty is easily
overcome by selecting the date when the action is
finally disposed of, in the sense that the decree
becomes final and binding between the parties after all
remedies against it are exhausted. As regards the
fourth date, i.e., the date when the court orders
execution to issue, it was felt that execution of a decree
is not a simple matter because it involves execution of
a money decree and the judgment-debtor's property
has to be attached and pending attachment a third
party, at times set up by the judgment-debtor, may
prefer a claim to the attached property which will have
to be investigated and determined by the executing
court and even where no claim is preferred the
attached property cannot be brought to sale
immediately and certain formalities have to be
complied with and even after the sale has taken place,
the judgment-debtor may further hold up the receipt of
the sale proceeds by the decree-holder by raising
objection to the conduct of the sale and at times, a
fresh auction sale may be 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 for execution may
become necessary and this would lead to an anomalous
position for the Court would have to fix the rate of
exchange, which may be different from each
application for execution. A further difficulty that was
pointed out by the court was that execution can only
issue for a sum expressed in Indian currency and it
cannot be for a sum which would be determined and
fixed by the executing court at the time of granting an
execution application. With regard to the fifth date,
namely, the date of payment, the Court felt that there
were three practical and procedural difficulties
namely, payment of court fees, the pecuniary limits of
the jurisdiction of courts and execution. Keeping in
view the considerations referred to above, this Court
declined to adopt the rule laid down in Miliangos case
[1976 AC 443 : (1975) 3 All ER 801] and held that it
would be fair to both the parties to take the date of
passing the decree, i.e., the date of judgment. The said
date was also held applicable to a case where a decree
is made in terms of an award made in a foreign
currency."
After observing as above, the Supreme Court noted that the Division Bench
in the said case had held that the rate prevailing on the date of the decree
passed by the Ld. Single Judge would be the conversion rate. Paragraph 122
reads as under:
"122. While passing the decision in terms of U.S.
dollars the learned Single Judge has not considered the
matter of conversion of US dollars into Indian
currency. The Division Bench has, however, adverted
to this aspect and applying the law laid down in
Forasol case the decree has been passed in terms of
US dollars as well as Indian rupees on the basis of the
rupee-dollar exchange rate prevailing on the date of
the decree passed by the learned Single Judge. The
said date was applied for the reason, that according to
the Division Bench the letters patent appeal filed by
Renusagar was not maintainable."
29. In the above judgment, the Supreme Court held that the Forasol
judgment is not required to be reconsidered. The Court held as under:
"The practical and procedural difficulties pointed out
by this Court in Forasol case against adopting the date
of payment cannot, therefore, be ignored. As at present
advised, we are not satisfied that the decision in
Forasol case calls for reconsideration. Since this is the
only question raised in C.A. No. 379/92 filed by
General Electric, the said appeal must fail."
In Renusagar, thus the Division Bench had taken the date of the decree by
the Single Judge, in respect of the foreign award, as the date for applying the
rate of conversion which was upheld by the Supreme Court.
30. Russel On Arbitration with respect to the aspect of currency of payment
opines as under:
"6-101 Currency of payment. Section 48(4) of
the Arbitration Act 1996 provides that an award may
order payment to be made in any currency. The proper
construction of this section was considered by the House
of Lords Lesotho Highlands Development Authority v
Impreglio SpA where Lord Phillips explained that there
are two possible way of interpreting the provision. The
first is to treat it as simply conferring a procedural
power to make an award in any currency, not thereby
affecting the existing substantive law concerning awards
in a foreign currency. This was the view favoured by the
majority in Lesotho Highlands Development Authority v
Impreglio SpA. The alternative approach, favoured by
Lord Steyn, was that s.48(4) represented a change in the
substantive law, by introducing an unconstrained power
to make an award in any currency. This was rejected by
the majority on the basis that if those who drafted the Act
had intended to give such a broad discretion they would
have done so more clearly, but the matter cannot be
considered entirely free from doubt.
Assuming that the existing principles of English
law do not apply to the exercise of discretion under
s.48(4) then the tribunal should make the award in the
proper currency of the contract under which the dispute
arose unless the parties have expressly or impliedly
agreed otherwise in writing. The proper currency of the
contract is the currency with which payments under the
contract have the closest and most real connection or, if
there is none, the currency which most truly expresses
the claimant's loss. An award in a foreign currency may
be enforced in England without the need to convert it to
sterling."
31. In Meenakshi Saxena and Ors. v. ECGC Ltd. and Ors. AIR 2018
SC 2831, the Supreme Court, following Forasol, observed as under:
"27. In the light of the ratio laid down by this Court
in determining the relevant date for conversion of
currency, the first procedure to be adopted by the
court is to decide the same in accordance with terms
of the contract, if such a Clause is not available in the
agreement then the courts have to determine the best
possible date, then this Court went ahead and dealt
with the procedure to be adopted. But in the present
facts that exercise is not relevant as there is a specific
Clause in the agreement i.e. Clause 17 which deals
with rate of interest. The Clause clearly says that
currency should be converted into rupees at the bank
buying rate of exchange at Mumbai on the date of
relevant shipment."
32. Thus, as per the above judgement, the Court has to determine the best
possible date, if the clause for conversion is not available in the contract.
33. What would be the best possible date in the present case? Recently,
in Royal Construction Company Pvt. Ltd. v. National Projects
Construction, EFA (OS) 19/2017, Decided on 17th December, 2018, a
Division Bench of this Court had adopted the doctrine of merger and held as
under:
"The doctrine of merger would certainly apply in a
case of this nature with the award having been
challenged first under Section 34 of the 1996 Act
before the learned Single Judge, then before the
Division Bench, and finally before the Supreme Court
by the JD. If, therefore, the date of the Award, which
itself is a decree under the 1996 Act, in effect is
postponed to the date of it attaining finality, i.e. 24th
February 2015, then that should be taken to be the date
when the amount becomes payable and that would be
considered to be the relevant date for conversion."
In this case, the Ld. Division Bench, after holding that the date of finality
should be taken as the date when the amount becomes payable, granted
certificate of appeal to the Supreme Court.
34. In DLF Universal Limited & Ors. v. Koncar Generators and
Motors Limited, (2018) 190 PLR 398, the Punjab & Haryana High Court
also held that the rate of conversion applicable in the case of enforcement of
a foreign award would be the date when the objections came to be decided
finally. Paragraph 17 of the said judgment reads as under:
"17. Enforcement of the foreign award is governed by
Part 2 of 'the Act'. Section 49 deals with the situation
when the foreign award is enforceable and binding.
Section 48 which has been extracted above lays down
conditions for enforcement of the foreign award.
Section 49 provides that where the Court is satisfied
that the foreign award is enforceable under this
Chapter, the foreign arbitral award shall be deemed to
be a decree of that Court. Section 49 clearly spells out
that before a foreign award is considered enforceable
as a deemed decree of that Court, the Court is required
to record a satisfaction that the foreign award is
enforceable under this Chapter. Such determination
finally comes when objections under Section 48 of 'the
Act' are finally decided. In this case objections under
Section 48 of 'the Act' came to be decided finally only
on 01.07.2014 when the revision petition filed by the
petitioner against dismissal of the objection petition
under Section 48, was finally dismissed."
35. Ideally, the arbitral award ought to have prescribed the rate of
conversion. The confusion has arisen as the award has failed to provide the
rate of conversion.
36. Though an arbitral award which does not prescribe the rate of
conversion can still be valid, the postponement of prescribing the rate of
conversion is writ with several anomalies and uncertainties. On the date
when the award is pronounced, neither party is sure of its entitlement or
liability. The party which loses or decides to challenge the award, if not
asked to deposit the awarded amount, may obtain huge benefits if the
foreign exchange rate at the end of the challenge turns out to be in its favour.
On the other hand, the party succeeding can be put to severe disadvantage if
the conversion rates are not to its benefit. Further, the amount awarded
continues to fluctuate till the final appeal/petition is decided and both parties
proceed merely on approximations. As the parties are corporate entities,
liabilities/ entitlements which are to be reflected in their balance sheets are
also unpredictable.
37. There are various advantages and disadvantages in accepting or
rejecting various dates which are suggested by either party for the purposes
of deciding the rate of conversion. If there is a decline in the rupee, the same
would benefit the succeeding party. If the rupee strengthens, it would benefit
the losing party. This coupled with the rates of interest that would have to be
applied would leave the awarded amount as extremely nebulous and
unpredictable. Such a situation also discourages parties from settling or
resolving the disputes and encourages speculative challenges to the award.
The variation in the awarded amount could, in some cases run into crores of
rupees only based upon the foreign exchange rate. Postponement of the date
of conversion could lead to unforeseen consequences, especially in the case
of foreign transactions where circumstances such as war, sanctions,
devaluation of currency etc. could lead to the award being rendered merely a
paper award. Such unpredictability, especially after the passing of the award
is wholly avoidable. Thus, in awards where amounts claimed and awarded
are in foreign currency, while not specifying the rate of conversion in the
award may not invalidate the award, it is an essential good practice for
awards to specify the rate of conversion applicable, unless there are
extenuating circumstances. Both the parties would then be aware of their
respective liabilities or entitlements and the same would be crystalized on
that date. A party which choses to challenge the award would be aware of
the risks fraught in the said challenge and the successful party is
compensated by means of interest, if awarded.
38. In the present case, the present execution petition was filed
immediately upon the objections under Section 34 being dismissed. The
Decree Holder obviously understood, rightly so, that the award became an
executable decree immediately upon the challenge having failed. At that
stage the awarded amount stood crystallised. What is being enforced in this
case is the award, as per Section 36. Unless the award has been modified by
the appellate forums leading to merger, the award as it is, is being enforced.
The award acquired finality only when the Supreme Court finally dismissed
the challenge to the award. Until then, this award could not be enforced,
though the present execution was pending during the said period. The
principle in an execution petition is that the Decree Holder should be placed
in the same position as he would have been if he had received the money on
the date of the award. The contract was in US Dollars. MMTC also conducts
business in foreign exchange. As per the principles culled out from the
above decisions, the Decree Holder is entitled to receive the sum only when
finality attaches to the award, which in this case, happened on 12th February,
2019 when the review petition was dismissed by the Supreme Court.
39. Thus, the rate of conversion that ought to be applied would be 1 USD
= INR 70.93, as applicable on 12th February 2019. The calculations have
been submitted by the parties.
Accordingly, it is directed that a sum of Rs.53,16,05,138/- be paid by
MMTC to the Decree Holder within four weeks;
A further sum of Rs.61,56,276/- be also paid by MMTC to the Decree
Holder within four weeks.
40. All approvals by the relevant authorities be also granted expeditiously
and not later than two weeks.
41. The petition is allowed in the above terms.
PRATHIBA M. SINGH
JUDGE
FEBRUARY 18, 2019
MR/dk
(Corrected & released on 27th February, 2019)
