Summary
On the enforcement of an ICC award expressed in euros, the Supreme Court held that the principle in Forasol v. ONGC applies under the Arbitration and Conciliation Act, 1996. The amount must be converted into rupees at the exchange rate on the date the foreign award becomes enforceable, which is when objections under Section 48 are finally dismissed and the award is deemed a decree under Section 49. However, an amount deposited in court pending objections that the award holder was permitted to withdraw, even against security, stands converted on the date of deposit, following Renusagar.
Issues
- Whether Forasol v. ONGC, decided under the Arbitration Act, 1940, applies to the enforcement of foreign awards under the Arbitration and Conciliation Act, 1996.
- What date governs the exchange rate for converting a foreign award expressed in foreign currency into Indian rupees.
- At what date amounts deposited in court by the award debtor during the pendency of objections to enforcement are to be converted.
Provisions considered
- Section 49, Arbitration and Conciliation Act, 1996A foreign award is deemed a decree once the court is satisfied that it is enforceable, with no separate decree required as under Section 17 of the 1940 Act. The Court held this occurs when objections under Section 48 are finally decided, which here was on 01.07.2014, and that date governs conversion. (¶¶ 2.6, 4, 4.1, 10, 10.1)
- Section 48, Arbitration and Conciliation Act, 1996The section sets out the grounds on which enforcement may be refused. The award becomes enforceable only when objections under it are finally dismissed, and deposits made while such objections were pending were the subject of the conversion dispute. (¶¶ 2.1, 2.3, 4, 4.1, 10)
- Sections 46, 47 and 50, Arbitration and Conciliation Act, 1996Read as part of the Part II, Chapter I scheme: a foreign award enforceable under the Chapter is binding (Section 46), evidence requirements apply (Section 47), and an appeal lies only against an order refusing enforcement (Section 50). (¶¶ 4, 4.1)
- Section 17, Arbitration Act, 1940Forasol selected the date of the decree under Section 17 because only then did the award become enforceable. The Court carried that rationale over to the 1996 Act, where enforceability arises automatically under Section 49. (¶¶ 5.5, 10)
- Order XXI Rule 1 and Order XXIV, Code of Civil Procedure, 1908Discussed by analogy. Under these provisions interest ceases on amounts deposited in court once notice is served, because the decree-holder can access the money; the same logic supports converting a withdrawable deposit on the date of deposit. (¶¶ 15, 15.1, 15.2, 15.3, 15.4)
Held
- Forasol has been widely followed by this Court and applies to cases under the 1996 Act even though it was decided under the 1940 Act. The High Court erred in holding otherwise. (¶¶ 8, 22)
- The court must choose a conversion date that puts the claimant in the position it would have been in had the debtor paid when due, bearing in mind fluctuating exchange rates. Forasol chose the date the award becomes enforceable. Under the 1996 Act that is the date objections under Section 48 are finally dismissed and the award is deemed a decree under Section 49, here 01.07.2014. (¶¶ 1.1, 5.4, 10, 10.1, 20)
- Where the award debtor deposits an amount in court pending objections and the award holder is permitted to withdraw it, even subject to furnishing security, the deposit stands converted on the date of deposit, as in Renusagar. From that date the money is available to the award holder, and treating it as unconverted would be inequitable. If the award holder cannot meet the condition for withdrawal, it must furnish the security or seek modification. (¶¶ 11.5, 12, 14, 16, 20)
- The Rs 7.5 crore deposit was made under a consent order allowing withdrawal against a bank guarantee from an Indian bank. The respondent neither withdrew it nor sought modification, so its plea that as a foreign company it could not obtain such a guarantee was rejected. That deposit stands converted on 22.10.2010 at the rate submitted, 1 euro = Rs 59.17. (¶¶ 11.1, 11.2, 13, 17)
- The further Rs 50 lakh deposit was made under a non-consensual interim order that did not permit withdrawal until the proceedings ended, so the respondent could not benefit from it earlier. It is converted at the rate on 01.07.2014, when the objection proceedings attained finality. (¶¶ 11.1, 18, 19)
- Once converted, the deposited amount is to be adjusted against the outstanding principal and interest under the award. The balance is converted at the rate on the date the award became enforceable. (¶¶ 20, 21)
Result
Appeal partly allowed; High Court's findings that Forasol does not apply under the 1996 Act and that the 01.07.2014 rate governs the entire award set aside; the Rs 7.5 crore deposit is to be converted at the 22.10.2010 rate and the Rs 50 lakh deposit and the balance at the 01.07.2014 rate, with the Executing Court (Additional District Judge cum Commercial Court) to compute the amount payable; no order as to costs.