1993 (10) TMI 232 - SC - Indian Laws

Court Affirms Decision, Clarifies Scope of Enquiry in Foreign Award Enforcement

Renusagar Power Co. Ltd. Versus General Electric Co.

The court affirmed the decision in the case, dismissing the appeals and affirming the decree passed by the High Court. The court clarified the scope of ... Whether in proceedings for enforcement of a foreign award under the Foreign Awards Act it is permissible to impeach the award on the merits? Held that:- In view of the provision in the scheme, all pending suits, appeals or other proceedings of whatever nature by or against the transferor company, viz., Renusagar, shall not abate or be discontinued or in any way be prejudicially affected by reason of the transfer of the undertaking of Renusagar and the said proceedings may be continued, prosecuted and enforced by or against Renusagar as if the scheme had not been made. The scheme of amalgamation does not, therefore, in any way affect the continuance of the proceedings in the above appeals in this court by Renusagar and in these circumstances, we find no ground for substituting the name of Hindalco Industries Ltd., as the appellant in place of Renusagar in C. A. No. 71 of 1990. The said application is, therefore, rejected. In the result, C.A. Nos. 71 and 71A of 1990 and C.A. No. 379 of 1992 are dismissed and the decree passed by the High Court is affirmed with the direction that in terms of the award an amount of US $ 12,333,355.14 is payable by Renusagar to General Electric out of which a sum of US $ 6,289,800 has already been paid by Renusagar in discharge of the decretal amount and the balance amount payable by Renusagar under the decree is US $ 6,043,555.14 which amount on conversion in Indian rupees at the rupee dollar exchange rate of ₹ 31.53 per dollar prevalent at the time of this judgment comes to ₹ 19,05,53,293.56. Renusagar will be liable to pay future interest at 18 per cent. on this amount of ₹ 19,05,53,293.56 from fine date of this judgment till payment. The parties are left to bear their own costs. Issues Involved:1. Scope of enquiry in proceedings for recognition and enforcement of a foreign award.2. Whether Renusagar was unable to present its case before the Arbitral Tribunal.3. Whether enforcement of the award is contrary to the public policy of the State of New York.4. Meaning of 'public policy' in the context of the Foreign Awards Act.5. Whether the award is contrary to the public policy of India.6. Relevant date for conversion of the amount awarded from foreign currency to Indian currency.7. Reconsideration of the decision in Forasol v. Oil and Natural Gas Commission.8. Entitlement to interest pendente lite and future interest.9. Adjustment of the sum deposited by Renusagar against the decretal amount.Detailed Analysis:I. Scope of Enquiry in Proceedings for Recognition and Enforcement of a Foreign Award:The court emphasized that in proceedings for enforcement of a foreign award under the Foreign Awards Act, the scope of enquiry is limited to the grounds mentioned in section 7 of the Act. This does not allow a party to impeach the award on the merits. The grounds for refusal to enforce a foreign award are similar to those at common law, which include lack of jurisdiction, fraud, public policy, and natural justice.II. Whether Renusagar was Unable to Present its Case:The court found no substance in Renusagar's claim that it was unable to present its case before the Arbitral Tribunal. Renusagar had voluntarily refused to appear before the Arbitral Tribunal after raising a preliminary objection that the arbitrators had become functus officio. The court held that the enforcement of the award is not barred by section 7(1)(a)(ii) of the Foreign Awards Act on this ground.III. Whether Enforcement of the Award is Contrary to the Public Policy of the State of New York:The court rejected the contention that enforcement of the award could be refused if it is contrary to the public policy of the State of New York. It held that the words 'public policy' in section 7(1)(b)(ii) of the Foreign Awards Act refer to the public policy of India, not any other country.IV. Meaning of 'Public Policy' in the Context of the Foreign Awards Act:The court clarified that 'public policy' in section 7(1)(b)(ii) should be construed narrowly. It means the doctrine of public policy as applied by Indian courts, which includes fundamental policy of Indian law, interests of India, and justice or morality.V. Whether the Award is Contrary to the Public Policy of India:- Violation of Foreign Exchange Regulation Act (FERA): The court held that the provisions of FERA are enacted to safeguard the economic interest of India. Any violation would be contrary to public policy. However, it found no violation of FERA in the award.- Disregard of the Orders of the Delhi High Court: The court found that the orders of the Delhi High Court did not prevent Renusagar from remitting the interest amount to General Electric. Therefore, the award of compensatory damages was not penalizing Renusagar for complying with the court's orders.- Interest on Interest (Compound Interest): The court held that awarding compound interest is not contrary to public policy in India.- Damages on Damages: The court rejected the contention that awarding compensatory damages on delinquent interest amounts to awarding damages on damages, which is contrary to public policy.- Unjust Enrichment: The court found no substance in the contention that the award results in unjust enrichment of General Electric.VI. Relevant Date for Conversion of the Amount Awarded from Foreign Currency to Indian Currency:The court affirmed the principle laid down in Forasol's case that the relevant date for conversion of foreign currency into Indian currency is the date of the judgment.VII. Reconsideration of Forasol's Case:The court did not find any reason to reconsider the decision in Forasol's case, which laid down the principle that the date of judgment is the relevant date for currency conversion.VIII. Entitlement to Interest Pendente Lite and Future Interest:The court declined to award interest for the period the proceedings for enforcement of the award were pending in the Bombay High Court and in the Supreme Court. It awarded future interest at 18% on the balance amount from the date of the judgment till payment.IX. Adjustment of the Sum Deposited by Renusagar Against the Decretal Amount:The court directed that the amount of Rs. 10,69,26,590 deposited by Renusagar should be converted into US dollars at the exchange rate of Rs. 17 per dollar prevalent at the time of payment, amounting to US $6,289,800. The balance amount payable by Renusagar was determined to be US $6,043,555.14, which on conversion at the exchange rate of Rs. 31.53 per dollar comes to Rs. 19,05,53,293.56.The appeals were dismissed, and the decree passed by the High Court was affirmed with the specified directions regarding the conversion and payment of the balance amount.