2023 (10) TMI 486 - SC - Indian Laws

Supreme Court rules on currency conversion in arbitration awards, allows payment in foreign currency

NATIONAL PROJECTS CONSTRUCTION CORPORATION LIMITED Versus ROYAL CONSTRUCTION COMPANY PRIVATE LTD. And ROYAL CONSTRUCTION COMPANY PVT. LTD. Versus NATIONAL PROJECTS CONSTRUCTION CORPORATION LIMITED

The Supreme Court clarified that the conversion of the awarded sum from USD to Indian Rupees should be as per the original agreement and the arbitrator's ... Conversion of foreign exchange rate of awarded sum money - Relevant date for conversion of the awarded sum from USD to Indian rupees - Whether the award contained any stipulation of making the payment in Indian currency? - HELD THAT:- The terms of the agreement are to be looked into for the purposes of deciding the question regarding the date of conversion. In the entire agreement, the relevant paragraphs dealing with the payments and advances and the payments of work in progress is laid down in paragraphs 31 and 32 and its sub-paragraphs. Paragraph 32.6 of the agreement states that payments against monthly account bills shall be made in Iraqi Dinars and US Dollars out of which 35 percent would be in Iraqi Dinars and 65 percent would be in US Dollars. Further, paragraph 32.8 defines the exchange rate for the purposes of conversion of Iraqi Dinars to US Dollars and the exchange rate being 01 Iraqi Dinar equivalent to 3.37778 US Dollars. There are no mention of payment being made in the Indian Currency i.e. INR from the agreement. Once there is no contract between the parties of making payment in Indian Currency INR, then, there would be no question of determining or finding out any date of conversion. Whether the award contained any stipulation of making the payment in Indian currency? - HELD THAT:- The agreement had stipulated that the Iraqi Dinar would be convertible to US Dollars at the following rate i.e. 1 Iraqi Dinar = 3.37778 US Dollars. The award does not permit or grant the liberty to the appellant to make the amount payable in Iraqi Dinars to be converted into Indian Currency (INR) - Apart from the amount of Bank Guarantee which had been encashed by the NPCCL of Rs.20 Lakhs, the other amount awarded is in Iraqi Dinars only. Whether the agreement, award or the judgment of this Court dated 24.02.2015 provided for payment of the awarded amount in Indian currency? - HELD THAT:- The award does not permit payment of the awarded amount in Indian currency except the amount of Rs. 20 lacs with admissible interest against the encashment of bank guarantee. As a necessary corollary, there would be no question of the amount awarded in Iraqi Dinars to be converted in Indian currency. The only conversion permissible was in US Dollars. In the above back drop, the question referred by the impugned judgment to be answered by this Court may not arise at all. Thus, there is no occasion or requirement for determining or fixing any date for conversion of the US Dollars into Indian Currency (INR). The payment has to be made in the foreign currency only along with computed interest. It would be open for the parties to pay and the other parties claiming to accept the Indian currency either at the current rate or at the agreed rate but this Court cannot meddle with the terms of the agreement or the award or the directions contained in the judgment of this Court dated 24.02.2015. Appeal disposed off. Issues Involved:1. Relevant date for conversion of the awarded sum from USD to Indian Rupees.2. Adherence to the original agreement and arbitrator's award.3. Permissibility of payment in Indian currency.Summary:Issue 1: Relevant Date for Conversion of the Awarded Sum from USD to Indian RupeesThe primary issue in these appeals was to determine the relevant date for converting the awarded sum from USD to Indian Rupees as per the agreement dated 29th June 1982 and the Supreme Court judgment dated 24th February 2015 in Civil Appeal Nos. 2543-44/2015. The Court emphasized that the date of conversion should be as per the original agreement dated 29.06.1982, and any deviation by the High Court was not justified.Issue 2: Adherence to the Original Agreement and Arbitrator's AwardThe Court reviewed the agreement and the arbitrator's award, which specified payments in Iraqi Dinars (ID) and US Dollars (USD). The agreement did not mention payments in Indian Rupees (INR). The arbitrator's award mandated conversion of amounts payable in Iraqi Dinars to US Dollars as per the original agreement, which specified an exchange rate of 1 ID = 3.37778 USD. The Court reiterated that the directions given by the arbitrator in the award must govern the field.Issue 3: Permissibility of Payment in Indian CurrencyThe Court found no provision in the agreement or the award for payment in Indian currency, except for the specific amount of Rs. 20 lakhs related to the encashment of a bank guarantee. Consequently, there was no basis for converting the awarded amount in Iraqi Dinars to Indian Rupees. The Court concluded that the awarded amount should be paid in foreign currency (USD) along with computed interest, and any conversion to Indian currency would be at the discretion of the parties involved, not mandated by the Court.The appeals were disposed of with the direction that the RCCPL could continue with its execution proceedings in accordance with the law. Pending applications, if any, were also disposed of.