Citation Code: 2024 INSC 593
Date of Judgement: 08 August 2024
Court: Hon’ble Supreme Court of India
Coram: Justice Pamidighantam Sri Narasimha & Justice Aravind Kumar
Factual Background
In the present case, the dispute arose out of a contract entered between Indian companies, DLF Ltd. and M/s Eastern India Powertech Ltd. (hereinafter “the Appellants”) and a Croatian company, Koncar Generators and Motors Ltd. (hereinafter “the Respondent”). In May 2004, the arbitral tribunal at the International Chamber of Commerce, Paris passed an award holding the Appellants liable to pay Euros 10,93,989.
Thereafter, the Respondent moved ahead with the execution of the award while the Appellants sought the award to be set aside. In 2010, after the Appellant’s petition for setting aside the award under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter “The Act”) was dismissed, the appellants filed:
Appeal under Section 37 of the Act against the Section 34 order
On 15 October 2010, the High Court dismissed the appeal and directed the Appellants to deposit Rs. 7.5 crores with the executing court, which can be released to Respondent by furnishing bank guarantee of equal amount in favour of executing court. Accordingly, the Appellants deposited the amount on 22 October 2010.
Objections under Section 48 of the Act
On 02 April 2011, the Trial Court dismissed the objections raised by the Appellants under Section 48 of the Act. Appellants filed a revision petition which was admitted by the High Court on 03 June 2011. The High Court stayed the Trial Court order on condition that Appellants will submit additional amount of Rs. 50 Lakhs with the executing court. However, it rejected the prayer of the Respondent for deposit of the amount in Euros. Subsequently, the revision petition was also dismissed by the High Court on 01 July 2014. The decision was not challenged further.
Execution of the Award
In 2016, the Trial Court permitted the respondent to withdraw the entire deposit. Subsequently, the Respondent received an amount of Rs 11.6 crores including interest. In 2017, the Trial Court while allowing the execution petition held 01 July 2014 (date of dismissal of revision petition by High Court) as the relevant date to convert the amount expressed in Euros to INR.
Filing of the Present Appeal
Aggrieved, the Appellants filed a revision petition before the High Court that was dismissed in 2018. The High Court after considering the provisions under Sections 48 and 49 of the Act and that the delay in the award’s execution was attributable to the Appellants, it held that the relevant date for conversion is 01 July 2014. The HC also rejected the applicability of the Supreme Court’s judgment in Forasol v Oil and Natural Gas Commission to the present case while observing that it was passed under the Arbitration Act, 1940.
This decision by the High Court has been challenged by the Appellants in the present case.
Issues
What is the relevant date to determine the foreign exchange rate for converting the award amount expressed in foreign currency to Indian rupees?
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?
Appellants’ Position
The Appellants contended that the relevant date for the conversion of the amount of Rs. 7.5 crores would be the date on which it was deposited, i.e., 22 October 2010, as it stood converted on this date and cannot be re-converted as per later date. They submitted that the High Court passed the order dated 15 October 2010 with the consent of both parties and therefore, the Appellants could not be faulted for the inability of the Respondent to withdraw the amount due to their failure to furnish the guarantee. Further, even if the Respondent was unable to do so, it did not apply for the modification.
They further submitted that the relevant date for conversion of the amount of Rs. 50 lakhs would be its deposit date, i.e., the 15 July 2011. and for the remaining amount, the rate of exchange as of 01 July 2014 would apply.
The Appellants also provided the following calculation (table provided by us) :
| Total Amount under award with interest (A) | Euros 16,73,469.07 |
| Exchange rate on 22 October 2010 | 1 Euro = Rs. 59.17 |
| Total amount deposited on 22 October 2010 (B) | 7.5 Crores or 12,67,534.22 Euros |
| Amount due under award as on 22 October 2010 (A-B) = C | 4,05,934.85 Euros |
| Exchange rate on 15 July 2011 | 1 Euro = 62.89 |
| Total amount deposited on 15 July 2011 (D) | 50 Lakhs or 79,503.90 Euros |
| Amount due after 15 July 2011 (C-D) = E | 3,26,430.88 |
Thus, the Appellants contended that only on (E) amount, the exchange rate on the 01 July 2014 will be applicable.
Respondent’s Position
The Respondent argued that the exchange rate as of 01 July 2014 would apply to the entire amount as the arbitral award could be deemed to be a decree on this date only. For the amount of Rs. 7.5. crores, they submitted that they had not consented to the same and the High Court only ordered to deposit the said amount without undertaking the activity of conversion.
They also relied on the judgment in the case, P.S.L. Ramanathan Chettiar v O.R.M.P.R.M. Ramanathan Chettiar to contend that the deposit of 8 crores during the pendency of the objections under Section 48 of the Act did not pass the title of the amount to the Respondent.
Decision And Reasoning
On Issue 1
The Hon’ble SC referred to various case laws to determine the relevant date for conversion applicable for the amounts deposited by the award debtor, i.e., Rs. 7.5 Crores and Rs. 50 Lakhs.
The Court primarily relied on the reasoning given in Forasol v Oil and Natural Gas Commission,. In this case, the award was passed under the Arbitration Act, 1940 in favour of Forasol, a French company and the amount was declared in Francs. The contract had a stipulated rate of exchange for a portion of amount i.e., the payments made in Indian rupee on or after 30.11.2006.
For the remaining amount that required conversion to Indian rupee, no exchange rate was provided in the contract and six possible dates were considered, this included the date when the amount was due to be paid, or the date of commencement of the action, or the date of decree, or the date when the court passed the order, or the date of payment of decretal amount, or the date of award/ decree passed by the court.
Subsequently, it was reasoned based on the Forasol judgment that the date to be selected is based on the contemplation that the plaintiff is put in the position where they would have been originally, had the defendant discharged their obligation. It has to be kept in mind that rate of exchange changes in a frequent fashion.
It was reasoned that the date of the decree which was the third deliberation in the Forasol judgment was more appropriate for determining rate of exchange as when a decree is passed, it becomes clearer as to what quantum of amount need paying to the decree-holder. The Court while delving into the applicability examined that under the 1940 Act, the Court determined date of decree as the proper date as the award is only enforceable after passing of the decree.
However, in the 1996 Act, enforceability of foreign award is automatic under Section 49 after objections under Section 48 are decided. Hence, the as per the 1996 Act, the date on which objections are decided and dismissed is the proper date of determination.
As an appeal and revision might occur, the decree becomes final and binding after all remedies are exhausted. The Hon’ble SC disagreed with the decision of the HC that the Forasol does not apply under the 1996 Act and 01 July 2014 was considered as the date when the decree attained finality.
On Issue 2
The Supreme Court noted that there are two deposits in the instant case with different terms; (i) order passed on 15 October 2010, with the consent of parties, for deposit of Rs 7.5 crores, allowing release of the amount on presentation of a bank guarantee & (ii) order passed 03 June 2011, without the consent of parties, for deposit of Rs. 50 lakhs and did not permit withdrawal during the pendency of proceedings. Rather, it was to be disbursed after final adjudication of the objections.
On first deposit
The Court found that the Respondent did not furnish the required bank guarantee which was consented to by the Respondent. The Respondent failed to do so and never applied for any modification or removal of this requirement. This money deposited in 2010 was not withdrawn by the Respondent on their own discretion.
The Court relied and followed the approach taken in Renusagar Power Co Ltd v General Electric Co. case due to similarity of facts. In that case, the deposits were made during pendency of proceedings and withdrawals were permitted against an Indian bank guarantee, which were duly carried out by the award creditor. However, the award creditor failed to remit the amount by converting it into USD, due to restriction by Reserve Bank of India and hence claimed that entire amount including the amount allowed to be withdrawn should be converted as per the rate prevalent at the time of judgement. However, the court noted that award creditor, did not move to court for necessary orders. In Renusagar, the Forasol decision was taken into consideration and only the remaining portion of amount was converted as per the date of decree.
It was also considered that the award debtor parted with the money on that date and the benefit of this amount goes to the holder who is permitted withdrawal and benefit from the same at this point in time. It would be unjust to not consider this date for calculating rate of exchange. (¶ 14)
Another inference was drawn from Order 21 Rule 1 and Order 24 of the CPC, as per the judgment of Gurpreet Singh v Union of India which discussed the rule for calculating interest when a part of amount is deposited by the judgment debtor. The Court here had held that the interest on amount deposited shall ceases to exist when the deposited gives a notice of the deposit. Reliance was placed on the reasoning of P.S.L Ramanathan Chettiar held that deposit is only a way to obtain stay on execution and title is not passed to the decree-holder and thus is not in satisfaction of a decree. When the payment is tendered outside the court to the holder, interest on such amount ceases to exist. Thus, when the amount is tendered, the liability of interest payment ceases to exist.
It was accepted that when the amount is deposited and the award holder is allowed to withdraw even on some conditions, it is considered that they could access the amount and benefit from it on their discretion.
Taking view of the reasoning, the Court held that the first deposit stood converted as per the date of deposit, i.e. 22 October 2010
On Second deposit
The court held that the second deposit stood on a different footing as withdrawal was not allowed till completion of proceedings. Thus, the conversion cannot be done on the date of deposit as there is no benefit to the Respondent from the said amount. Thus, the appropriate date of conversion is on completion of proceedings i.e., on completion of revision proceedings on 01 July 2014.
Therefore, the first deposit was to be converted as per the date of deposit and for the purpose of second deposit, the date of completion of proceedings was considered by the Hon’ble SC.
The appeal was partly allowed and the judgment of the High Court was set aside.
Author(s)
Gunjeeta Jangra
Student at NLIU, Bhopal
Anurag Mishra
Student at NLIU, Bhopal