Case Note & Summary
The Supreme Court addressed the issue of the correct date for converting a foreign currency arbitral award into Indian rupees for enforcement. The appellants, Indian companies, and the respondent, a Croatian company, were parties to a contract for the supply of generators. Disputes led to an ICC arbitration in Paris, resulting in an award dated 12.05.2004 in euros in favor of the respondent. The respondent filed for execution in 2004, while the appellants filed objections under Section 34 of the Arbitration and Conciliation Act, 1996, which were dismissed on 28.04.2010. The appellants then filed an appeal under Section 37 and objections under Section 48. On 15.10.2010, the High Court recorded a consensus: the appeal and Section 34 application were withdrawn, and the appellants agreed to deposit Rs. 7.5 crores, which the respondent could withdraw upon furnishing a bank guarantee. The appellants deposited Rs. 7.5 crores on 22.10.2010. The Trial Court dismissed the Section 48 objections on 02.04.2011. The appellants filed a revision, and the High Court on 03.06.2011 stayed the order subject to deposit of an additional Rs. 50 lakhs, which was deposited on 15.07.2011. The revision was dismissed on 01.07.2014, making the award final. In execution, the Trial Court on 24.08.2016 permitted the respondent to withdraw the Rs. 8 crores deposit, which it did on 10.10.2016, receiving Rs. 11,60,12,100 with interest. The Trial Court then held that the conversion date was 01.07.2014, the date the award became final. The High Court affirmed this, rejecting the appellants' argument that the date of the award (12.05.2004) should apply. The Supreme Court confined the issue to the conversion rate for the Rs. 8 crores deposit. The appellants argued that the deposit of Rs. 7.5 crores on 22.10.2010 and Rs. 50 lakhs on 15.07.2011 should be converted at the exchange rates on those dates, with only the balance converted at the final date. The respondent contended that the entire award should be converted at the date of enforceability (01.07.2014). The Supreme Court held that the date of enforceability (01.07.2014) is the general conversion date, but for amounts deposited in court and made available to the decree holder, the date of deposit applies. Applying this, the Court directed that the Rs. 7.5 crores deposited on 22.10.2010 be converted at the exchange rate on that date, the Rs. 50 lakhs deposited on 15.07.2011 be converted at the rate on that date, and the balance of the award be converted at the rate on 01.07.2014. The Court set aside the impugned judgment and remanded the matter to the Executing Court for recalculation.
Headnote
A) Arbitration - Enforcement of Foreign Award - Conversion of Foreign Currency - Date of Conversion - The date when the arbitral award becomes enforceable, i.e., when objections under Section 48 are finally dismissed and the award attains finality, is the relevant date for conversion of the award amount from foreign currency to Indian rupees, following the principle in Forasol v. Oil and Natural Gas Commission. (Paras 1, 1.1, 2.5-2.6) B) Arbitration - Deposit in Court - Conversion Rate - Date of Deposit - Where the award debtor deposits an amount in court pending objections, and the decree holder is permitted to withdraw it, the date of such deposit is the relevant date for conversion of that deposited amount, as per the principle in Renusagar Power Co Ltd v. General Electric Co. (Paras 1.1, 3, 4) C) Arbitration - Section 49 - Deemed Decree - Enforceability - Under Section 49 of the Arbitration and Conciliation Act, 1996, a foreign award is deemed to be a decree only when the court is satisfied that it is enforceable, which occurs when objections under Section 48 are finally decided. (Paras 2.6, 4)
Issue of Consideration
What is the correct date for determining the foreign exchange rate for converting an arbitral award expressed in foreign currency to Indian rupees, and what is the effect of a deposit made by the award debtor during the pendency of proceedings challenging the award?
Final Decision
The Supreme Court allowed the appeal in part, setting aside the impugned judgment and remanding the matter to the Executing Court for recalculation. The Court held that the Rs. 7.5 crores deposited on 22.10.2010 shall be converted at the exchange rate on that date, the Rs. 50 lakhs deposited on 15.07.2011 shall be converted at the rate on that date, and the balance of the award shall be converted at the rate on 01.07.2014.
Law Points
- Date of conversion of foreign currency award
- Enforceability of arbitral award
- Deposit in court pending objections
- Forasol principle
- Renusagar principle
- Section 49 Arbitration and Conciliation Act
- 1996
