Contractual Conversion Rate Applied to Indian Rupee Payments | Foreign Currency Conversion Date

The court held that the fixed conversion rate specified in the contract applied only to 20% of payments made in Indian Rupees, with the remaining 80% to be paid in French Francs. The enhanced rate of exchange determined by the Umpire applied to all Indian Rupee payments from a specific date. The court decided that the foreign currency amount should be converted into Indian Rupees as of the date of the decree. ONGC's claims for tax differential and interest were rejected. Forasol's appeal was allowed, ONGC's appeal was dismissed, and ONGC was directed to pay Forasol's costs.

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Issues Involved:
1. Applicability of the rate of exchange specified in the contract.
2. Applicability of the enhanced rate of exchange specified by the Umpire.
3. Date for converting the foreign currency amount into Indian Rupees.
4. ONGC's claim for tax differential and interest.

Detailed Analysis:

1. Applicability of the Rate of Exchange Specified in the Contract:
The primary issue was whether the rate of exchange mentioned in Article IX-3.1 of the contract (FF 1.033 = Rs. 1.000) applied to all payments or only to the 20% of the payments made in Indian Rupees. The court held that the fixed conversion rate applied only to 20% of the operational fee, standby fee, and equipment charges payable in Indian Rupees. The remaining 80% and other amounts were to be paid in French Francs, emphasizing that the foreign party desired payment in its own currency to avoid dependency on the stability of the Indian Rupee.

2. Applicability of the Enhanced Rate of Exchange Specified by the Umpire:
The contention was whether the enhanced rate of exchange (FF 1.000 = Rs. 1.5178) specified by the Umpire applied only to the interest payable to Forasol or to all payments. The court concluded that the enhanced rate of exchange applied to all payments in Indian Rupees from November 30, 1966, not just to the interest. This conclusion was based on the Umpire's award and the subsequent erratum which clarified that the enhanced rate of exchange applied to both parties and to all rupee payments.

3. Date for Converting the Foreign Currency Amount into Indian Rupees:
The court deliberated on various dates for converting the foreign currency amount into Indian Rupees: the date when the amount became due, the date of the commencement of the action, the date of the decree, the date when the court orders execution to issue, and the date of payment. The court ultimately decided that the proper date for conversion was the date of the decree, ensuring that the plaintiff is put in the same position as if the defendant had discharged the obligation on the due date. This selection avoids the complexities and uncertainties associated with other dates.

4. ONGC's Claim for Tax Differential and Interest:
ONGC's claim for tax differential was based on Article IV-1.2 of the contract, which stipulated adjustments in tax payments. The court found that this claim did not survive as the amounts paid by ONGC as tax on behalf of Forasol were already adjusted in the award. ONGC's claim for interest on amounts payable by Forasol was also rejected. The award clearly stated that there was no right to interest on amounts payable in Rupees, and ONGC's claim pertained to amounts payable in Rupees, not French Francs.

Conclusion:
The court allowed Forasol's appeal, setting aside the Division Bench's order and restoring the Single Judge's order with a modification that ONGC could pay in French Francs after obtaining the requisite permission under the Foreign Exchange Regulation Act, 1973. ONGC's appeal was dismissed, and ONGC was directed to pay Forasol the costs of both appeals in the Supreme Court and the appeal in the Delhi High Court.

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