Case Note & Summary
The dispute arose from a contract between Forasol, a French company, and the Oil and Natural Gas Commission (ONGC) for structural drilling in India. The contract stipulated payments in French Francs and Indian rupees, with a fixed conversion rate for a portion of the payments. After the Indian rupee was devalued, Forasol claimed a higher conversion rate, leading to arbitration. The Umpire's award directed payments in French Francs but did not specify a conversion rate for Indian rupees. The Delhi High Court initially upheld the award but did not fix a conversion date, leading to appeals. The Supreme Court examined whether the contract's conversion rate applied to all payments and determined that the date of the decree was the appropriate date for currency conversion. The court emphasized that while it could issue decrees in foreign currency, compliance with the Foreign Exchange Regulation Act was necessary. The court ultimately upheld Forasol's appeal, clarifying the principles for currency conversion in such cases.
Headnote
A) Arbitration - Execution of Decree - Currency Conversion - Code of Civil Procedure, 1908, Section 47 - The court must select a proper date for fixing the rate of exchange to ensure the plaintiff is in the same position as if the obligation had been discharged timely. The date of the decree is determined to be the appropriate date for conversion (Paras 568-575). B) Arbitration - Jurisdiction of Courts - Foreign Currency Payments - Foreign Exchange Regulation Act, 1973 - Courts can pass decrees for sums in foreign currency, but must ensure compliance with foreign exchange regulations. The decree must provide for rupee equivalents in case of non-compliance (Paras 590-591). C) Arbitration - Award in Foreign Currency - Arbitration Act, 1940, Section 17 - An award can be made in foreign currency, but must specify the conversion rate for execution. The court can correct omissions in the award regarding currency conversion (Paras 587-589).
Issue of Consideration
Whether the rate of conversion mentioned in the contract applied to all payments under the contract, and the proper date for converting foreign currency into Indian rupees.
Final Decision
The Supreme Court allowed Forasol's appeal, determining that the date of the decree was the appropriate date for currency conversion and clarifying the principles for issuing decrees in foreign currency.
Law Points
- Arbitration
- Foreign Currency
- Execution of Decree
- Rate of Exchange
- Jurisdiction of Courts
