TaxTMI 
TaxTMI 
1993 (10) TMI 232
X X X X Extracts X X X X
X X X X Extracts X X X X
....production and sale of electric power. General Electric Company (for short "General Electric"), respondent in C. A. Nos. 71 and 71A and the appellant in C. A. No. 370 of 1992 is a company incorporated under the laws of the State of New York in the United States of America and is engaged in the business of manufacturing, selling and servicing electrical products and various ancillary activities. After negotiations, the parties arrived at an arrangement whereunder General Electric was to supply to Renusagar the equipment and power services for setting up a thermal power plant to be known as "Renusagar Power Station" at Renukoot and, on November 27, 1963, Renusagar moved the Government of India for its approval. By its letter dated January 2, 1964, the Government of India gave its approval to the proposals and thereafter a formal contract was executed by the parties on August 24, 1964. Under the said contract, General Electric undertook to supply equipment and services for a plant having a capacity of 135,800 kw. The total price for the electrical and mechanical equipment, spare parts, freight forwarding services, plant design and consulting services was US dollars 13,195,000. The con....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the parties under the contract shall be governed in all respects by the laws of the State of New York, USA (article XIX(A)). It was, also, provided that if General Electric received an exemption from the Government of India from the payment of income-tax levied by the Government of India on interest payments made by Renusagar then the interest rate on that series of promissory notes as exempted shall be reduced from 6V2 per cent. to 6 per cent. per annum commencing on the date such exemption is made effective and the notes so affected shall be replaced by new notes (article III(A)3(b)). In the contract, it was stated that General Electric intended to apply to the Central Government of India for exemption from income-tax on the interest (including capitalisation interest and interest thereon) and Renusagar undertook to assist General Electric in expediting the application of General Electric for exemption. It was also agreed that should the application of General Electric be denied Renusagar may withhold the Indian income-tax applicable to any payments of interest, but Renusagar was to furnish General Electric with receipts on all withheld amounts paid to the Government of India....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me-tax on the interest payable by Renusagar was restored and the liability of Renusagar for interest was reduced from 6½ per cent. to 6 per cent. On June 3, 1981, Renusagar moved the Reserve Bank of India for permission to remit the balance amount of regular interest calculated at 6 per cent. per annum to General Electric and on February 3, 1982, the Income-tax Officer, Bombay, issued "no objection certificate" for repatriating the balance regular interest amount of US dollars 2.130 million. The said amount was, however, not remitted by Renusagar to General Electric. It appears that there was some delay on the part of the General Electric in adhering to the time schedule for the supply of equipment and keeping the same in view General Electric by their letter dated January 5, 1967, agreed to defer the payment of the first instalment payable on June 30, 1967, by six months and suggested that the promissory notes shall be recast into 15 notes instead of 16 which would commence on the 36th month from the contract effective date and capitalised interest shall be calculated for 20 months instead of 14 months and the said interest would then be reduced by a sum of 132,500 US do....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ber, 1971, the fourth instalment which was payable on December 31, 1968, was paid in instalments by December, 1973, and the fifth instalment which was payable on June 30, 1969, was paid in instalments by February, 1976. On March 1, 1982, General Electric served a notjce on- Renusagar indicating its intention to arbitrate pursuant to clause XVII of the contract. On March 2, 1982, General Electric made a request to the Court of Arbitration of the ICC for arbitration of the disputes between General Electric and Renusagar. ICC, after taking cognizance of the said request for arbitration made by General Electric, called upon Renusagar to nominate their arbitrator, file its reply and remit certain sums towards administrative expenses and arbitration fees. Renusagar raised an objection that the claims of General Electric did not fall within the purview of the arbitration clause in the contract and challenged the arbitrability of the claims. The arbitration court of the ICC accepted that there was a prima facie dispute within the agreement and appointed the Rt. Hon. Peter Thomes, O.C.MP as Chairman of the Arbitral Tribunal and confirmed the appointment of Prof. Boris I. Bittker as arbit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idely worded arbitration clause contained in article XVII of the contract. On August 19, 1982, General Electric filed a suit in the Calcutta High Court against the United Commercial Bank to enforce the bank guarantee given by the said bank at the instance of Renusagar. As a counter to the said suit, Renusagar, on November 25, 1982, filed a suit (No. 127 of 1982) in the Court of the Civil Judge, Mirzapur, U. P., praying for a declaration that the guarantee given by-the United Commercial Bank for and on behalf of Renusagar stood discharged and had become ineffective and unenforceable and for a mandatory injunction directing and ordering General Electric to settle the claim of Renusagar regarding 75 MVA transformers and to satisfy the settlement validly arrived at of the claim of Renusagar as mentioned in the plaint of the said suit. General Electric filed an application in the Mirzapur court whereby it was prayed that the suit was liable to be stayed under section 10 and/or section 151, Civil Procedure Code, in respect of the first relief and under section 3 of the Foreign Awards Act in respect of the second relief claimed by Renusagar in the plaint. The said application was rejec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1985. Each party was represented by counsel and legal and other advisers and issues Nos. (g) to (p) of para 22 of the terms of reference were argued and submitted for consideration by both the sides and the hearing was adjourned to a later date for more detailed consideration to be given to the remaining issues and for further written submissions to be made by both parties. The next hearing was fixed to be in London to begin on October 1, 1985, and both parties were summoned to appear before the Arbitral Tribunal. Khaitan and Partners, lawyers for Renusagar, sent a letter dated July 24, 1985, to the Arbitral Tribunal, wherein they stated that an Indian civil court had seisin of the whole of the subject-matter of the reference in this arbitration and submitted that in consequence the Arbitral Tribunal and the ICC had become functus officio and that no further proceedings in this arbitration should be taken by the Arbitral Tribunal. The said submission by Renusagar was disputed by General Electric and the Arbitral Tribunal informed the parties that the matter would be considered as a preliminary issue at the scheduled meeting in London on October 1, 1985. The scheduled meeting took p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f regular interest was barred by limitation and held that the applications submitted by Renusagar to the Reserve Bank of India on June 3, 1981, and August 29, 1981, for permission to remit the said amount to General Electric amount to acknowledgment. It was also held that the said sum had to be computed in US dollars regardless of variation in the dollar-rupee exchange rate prevailing from time to time. As regards the claim for compensatory damages on the said amount of regular interest, which was withheld by Renusagar, the Arbitral Tribunal, after referring to the decisions of New York courts, has held that an arbitrator's paramount responsibility is to reach an equitable result and that it is a basic principle of damages for breach of contract applicable throughout the U.S. (including New York) that a party to a contract who is injured by its breach is entitled to compensation for the injury sustained and is entitled to be placed in so far as this can be done by money in the same position he would have occupied if the contract had been performed. The Arbitral Tribunal found that General Electric would have benefited "dollar for dollar" from the foreign tax credits that it could h....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... interest. The Arbitral Tribunal found that under the 1964 contract the notes evidencing the obligation of Renusagar to pay the purchase price "shall bear interest, at the rate of 6.5 per cent. per annum on the outstanding principal balance", subject to the agreed reduction to 6 per cent. commencing with the date when tax exemption, if granted, is made effective and that the rescheduling negotiations on which Renusagar relied never resulted in an effective agreement and there was no evidence of a waiver by General Electric of its right to be paid on the original due dates when the rescheduling plan collapsed and further that Renusagar had acknowledged in telex dated March 25, 1976, that they were liable for interest on the delayed payment of the principal. The Arbitral Tribunal also rejected the contention that the claim of General Electric in this regard was barred by the statute of limitation. Taking into account the acknowledgment contained in the telex dated March 25, 1976, the Arbitral Tribunal deducted a sum of US dollars 316,610 from the amount of US dollars 783,686.20 computed as interest at 6 per cent. and held that General Electric was entitled to a net amount of US dolla....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Compensatory damages to March 31,1986, on the above regular interest continuing at the annual rate of 8 per cent. on the said regular interest until payment 6,347,748.50 3. Delinquent interest on late payments of principal 467,076.20 4. Compensatory damages to March 31,1986, on the above delinquent interest continuing at the annual rate of 8 per cent. on the said delinquent interest until payment 1,324,357.75 5. Spare parts 119,053.00 6. Compensatory damages to March 31,1986, on the above spare parts continuing at the annual rate of 8 per cent. on the said sum for 276,702.17 7.Towards costs of General Electric 1,549,899.00 Total 12,215,622.14 The Arbitral Tribunal has awarded interest at the annual rate of 8 per cent. on items, 1, 3 and 5. On October 15, 1986, General Electric instituted proceedings for enforcement of the award of the Arbitral Tribunal by filing Arbitration Petition No. 159 of 1986 under section 5 of the Foreign Awards Act in the Bombay High Court. On October 17, 1986, Renusagar instituted a suit (Suit No. 265 of 1986) in the Court of the Civil ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d delinquent interest and the award of compound interest is contrary to public policy ; (ix) the compensatory damages were excessive and unusual ; (x) the chairman of the Arbitral Tribunal was biased against Renusagar ; and (xi) the costs of arbitration were unconscionable and excessive. The learned single judge (Pendse J.) has considered all the aforesaid objections raised on behalf of Renusagar in his very comprehensive judgment dated October 21, 1988, wherein after rejecting the said objections, he has held mat the award is enforceable under the provisions of the Foreign Awards Act and on that basis a decree in terms of the award was drawn. Renusagar filed an appeal (Appeal No. 680 of 1989) under clause 15 of the Letters Patent of the Bombay High Court against the said judgment of the learned single judge which was disposed of by a Division Bench of the said High Court (C. Mookerjee C.J. and Mrs. Sujata Manohar J.) by judgment dated October 12, 1989. The learned judges of the High Court held that the said appeal was not maintainable in view of section 6(2) of the Foreign Awards Act. Learned judges, however, examined the matter on merits and found that there was no substanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iling on the date of payment. During the pendency of these appeals this court, by order dated February 21, 1990, on I. A. No. 1 of 1990 in Civil Appeal No. 71 of 1990 stayed the operation of the judgment and decree under appeal subject to Renusagar depositing in the original side of the Bombay High Court, the sums equivalent to one-half of the decretal amount calculated as on date and furnishing security to the satisfaction of the High Court in respect of the decretal amount. General Electric was permitted to withdraw the deposit upon furnishment of security by way of bank guarantee for the sum to be withdrawn in excess of rupees four crores to the satisfaction of the High Court. In the said order it was also directed that interest at 10 per cent. per annum would be payable by Renusagar on the balance of the decretal amount in the event of its failing in the appeal and correspondingly General Electric would be liable to pay interest at the same rate on the amount withdrawn by it in the event of the appeal succeeding. In pursuance of this order, Renusagar deposited a sum of Rs. 9,69,26,590 on March 20, 1990, which was withdrawn by GEC after furnishing the necessary bank guarantee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be removed through various international conventions. The first such international convention was the Geneva Protocol of 1923 which was drawn up on the initiative of the ICC under the auspices of the League of Nations. The Geneva Protocol had two objectives, first, it sought to make arbitration agreements, and arbitration clauses in particular, enforceable internationally; and, secondly, it sought to ensure that awards made pursuant to such arbitration agreements would be enforced in the territory of the State in which they were made. The Geneva Protocol of 1923 was followed by the Geneva Convention of 1927 which was also drawn up under the auspices of the League of Nations. The purpose of this Convention was to widen the scope of the Geneva Protocol of 1923 by providing recognition and enforcement of protocol awards within the territory of contracting States (not merely the State in which the award was made). (See Alen Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, second edition, pages 61-62). India was a signatory to the Protocol of 1923 and the Convention of 1927. With a view to implementing the obligations undertaken under the said Protoco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shall, subject to the provisions of this Act, be enforceable in India as if it were an award made on a matter referred to arbitration in India. Sub-section (2) prescribes that any foreign award which would be enforceable under this Act shall be treated as binding for all purposes on the persons as between whom it was made and may be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India. Section 5 makes provision for filing of foreign awards in court. In sub-section (1) it is laid down that any person interested in a foreign award may apply to any court having jurisdiction over the subject-matter of the award that the award be filed in court. Subsection (2) requires that such an application shall be in writing and shall be numbered and registered as a suit between the applicant as plaintiff and the other parties as defendants. Sub-section (3) requires the court to give notice to the parties to the arbitration other than the applicant requiring them to show cause, within a time specified why the award should not be filed. Section 6 deals with enforcement of foreign awards. Sub-section (1) lays down that where the court is satisfie....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the parties or failing such agreement, was not in accordance with the law of the country where the arbitration took place ; or (v)the award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made ; or (b)if the court dealing with the case is satisfied that- (i)the subject-matter of the difference is not capable of settlement by arbitration under the law in India ; or (ii)the enforcement of the award will be contrary to public policy; (2) If the court before which a foreign award is sought to be relied upon is satisfied that an application for the setting aside or suspension of the award has been made to a competent authority referred to in sub-clause (v) of clause (a ) of sub-section (1), the court may, if it deems proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to furnish suitable security." The objection of Renusagar against enforceability of the award is based on (i) section 7(1)(a )(ii) of the Foreign Awards Act, on the ground....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it disregard of the provisions of the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as "FERA"), and would also cover unjust enrichment ; (iii)it would be contrary to the public policy of India as well as of the State of New York to award interest on interest and compounding it further and to award damages on damages ; (iv)under the contract interest was payable only up to the date of maturity of each promissory note and no interest was payable for the period subsequent of the said date and the only remedy available to General Electric in the event of default in payment of an instalment on the due date was to enforce the bank guarantee or to recall all the promissory notes (v)under the original approval dated January 2, 1964, given by the Government of India, the total amount of loan was to be repaid in sixteen semi-annual instalments between 30 and 120 months from the contract effective date and payment of interest was specifically restricted for the period from the 16th to the 30th month and thereafter upon capitalisation from the 30th month to the 120th month and no interest was payable without the Foreign Exchange Regulation Act sanction after the due d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate with reference to which conversion of foreign currency is to be made is a matter of substance and is governed by lex contractus, i.e., the law of the contract, and not by lex fori, i.e., the law of the forum. It has been urged that the law of the State of New York is the law of the contract and that the said law provides the date of breach as the date of conversion and therefore, the amount awarded in US dollars under the award of the Arbitral Tribunal must be converted into Indian currency on the basis of the rate prevalent on the date of the breach. It has been submitted that the decision of this court in Forasol v. Oil and Natural Gas Commission [1986] 60 Comp. Cas. 286, on which reliance has been placed by the Division Bench of the High Court, has no application to the present case because in that case the court was not dealing with a foreign award but was dealing with an award made under the Indian Arbitration Act, 1940. Shri Shanti Bhushan, has, on the other hand, submitted that: (i ) the scope of enquiry in proceedings under section 5 of the Foreign Awards Act is confined to questions relating to the enforcement of the award and does not comprehend a challenge to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enge to the award on the basis of unjust enrichment, the award of compound interest, the award of damages on damages does not fall within the ambit of permissible objections on the ground of violation of public policy in section 7(1)(b)(ii ) of the Foreign Awards Act; (ix) there is no violation of the provisions of the Foreign Exchange Regulation Act because in view of the approval that had already been granted by the Government of India to the original contract, there was no prohibition against remittance of regular interest on the instalments which had become due and payable and the refusal on the part of the Government to give approval to rescheduling of* the payment of instalments did not in any way preclude the Government of India from granting necessary permission for remittance of the interest on the unpaid instalments under section 9 of the Foreign Exchange Regulation Act ; (x) in any event, the bar of section 9 of the Foreign Exchange Regulation Act is not applicable- to the proceedings for enforcement of the award in view of section 47(3) of the Foreign Exchange Regulation Act and the enforcement of the award does not involve contravention of the provisions of the Foreign....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith section 7 of the Foreign Awards Act ? II.Were Renusagar unable to present their case before the Arbitral Tribunal and consequently the award cannot be enforced in view of section 7(1)(a)(ii ) of the Foreign Awards Act ? III.Does section 7(1)(b)( ii) of the Foreign Awards Act preclude the enforcement of the award of the Arbitral Tribunal for the reason that the said award is contrary to the public policy of the State of New York ? IV.What is meant by "public policy" in section 7(1)(b)(ii ) of the Foreign Awards Act ? V.Is the award of the Arbitral Tribunal unenforcable as contrary to public policy of India on the ground that- (a)it involves contravention of the provisions of the Foreign Exchange Regulation Act ; (b)it penalises Renusagar for acting in accordance with the interim order passed by the Delhi High Court in the writ petition filed by Renusagar challenging the withdrawal of exemption from income-tax on the interest paid to General' Electric ; (c)it results in the charging of interest on interest which is compounded and also damages on damages ; (d)it would lead to unjust enrichment for General Electric. VI.Which law would govern the rate of e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he award is valid and final according to the law governing the arbitration proceedings. The award would not be recognised or enforced if, under the submission agreement and the law applicable thereto, the arbitrators had no jurisdiction to make it, or it was obtained by fraud or its recognition or enforcement would be contrary to public policy or the proceedings in which it was obtained were opposed to natural justice. (See Dicey and Morris, The Conflict of Laws, 11th edition, rules 62-64, pages 558-559 and 571-572 and Cheshire and North, Private International Law, 12th edition pages 446-447). The English courts would not refuse to recognise or enforce a foreign award merely because the arbitrators (in its view) applied the wrong law to the dispute or misapplied the right law. (See Dicey and Morris, The Conflict of Laws, 11th edition, volume II, page 565). Under the Geneva Convention of 1927, in order to obtain recognition or enforcement of a foreign arbitral award, the requirements of clauses (a) to (e) of article 1 had to be fulfilled and in article 2, it was prescribed that even if the conditions laid down in article 1 were fulfilled recognition and enforcement of the award w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....merits of an award to which the Convention applies and in this respect, therefore, differs from the provisions of some systems of national law governing the challenge of an award, where an appeal to the courts on points of law may be permitted," (Redfern and Hunter, Law and Practice of International Commercial Arbitration, second edition, page 461). In our opinion, therefore, in proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961, the scope of enquiry before the court in which the award is sought to be enforced is limited to the grounds mentioned in section 7 of the Act and does not enable a party to the said proceedings to impeach the award on the merits. II. Bar to the enforcement of the award under section 7(1)( a)(ii) of the Act. As indicated earlier, the grievance of Renusagar is that the Arbitral Tribunal on October 1, 1985, decided the preliminary objection raised by Renusagar that the arbitrators had become functus officio and were not entitled to proceed with the arbitration proceedings on the merits and that the Arbitral Tribunal thereafter proceeded to deal with the merits of the claim of General Electric without any further notice ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wherein a reference was made to the notice issued by Renusagar to the effect that the ICC Arbitration Tribunal had become functus officio and that neither could the ICC Arbitration Tribunal proceed with the arbitration nor could Renusagar participate in the same on the ground that the application submitted by General Electric under section 3 of the Foreign Awards Act had been rejected by the Mirzapur civil court and the said order of the court had not yet been set aside or stayed by the Allahabad High Court in the revision petition filed by General Electric. Renusagar, through their advocates (Khaitan and Partners) also sent a petition dated August 23, 1985, to the Secretary General, ICC, as well as the Secretariat, ICC of Arbitration, reiterating their objection that the arbitrators had become functus officio and could not proceed and/or function. In his communication to Khaitan and Partners dated September 2,1985, the Chairman of the Arbitral Tribunal intimated that the question as to the effect of the suit filed in the Mirzapur court on the arbitration would be considered as a preliminary issue at the scheduled meeting on October 1, 1985. On September 23, 1985, Khaitan and Partn....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the ground that it is contrary to the public policy of the State of New york. Shri Venugopal has urged that although under sub-clause (b) of clause (2) of article V of the New York Convention the recognition and enforcement of an arbitral award can be refused if the competent authority in the country where recognition and enforcement is sought finds that the recognition or enforcement of the award would be contrary to the public policy of that country, i.e., the country where the award is sought to be enforced, a departure has been made in section 7(1)(b)( ii) of the Foreign Awards Act which prescribes that the foreign award may not be enforced under the said Act if the court dealing with the case is satisfied that the enforcement of the award would be contrary to public policy. The submission of Shri Venugopal is that in section 7(1)(b)( ii) of the Act, Parliament has deliberately refrained from using the words "public policy of India" which implies that the words "public policy" are not restricted to the public policy of India but would cover the public policy of the country whose law governs the contract of the country of the place of arbitration and the enforcement of an award....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to enforce the award by the courts where the award is made and thereby avoid the problem of "double exequatur". It also restricts the scope of enquiry before the court enforcing the award by eliminating the requirement that the award should not be contrary to the principles of the law of the country in which it is sought to be relied upon. Enlarging the field of enquiry to include public policy of the courts whose law governs the contract or of the country of place of arbitration, would run counter to the expressed intent of the legislation. With regard to the provisions of the Arbitration (Protocol and Convention) Act, 1937, it may be stated that section 7(1) of the said Act, as originally enacted, read as under: "7. Conditions for enforcement of foreign awards.-(1) In order that a foreign award may be enforceable under this Act it must have- (a)been made in pursuance of an agreement for arbitration which was valid under the law by which it was governed, (b)been made by the tribunal provided for in the agreement or constituted in the manner agreed upon by the parties, (c)been made in conformity with the law governing the arbitration procedure, (d)become final in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovince or State in India. This means that even in the Protocol and Convention Act, 1937, the Legislature had used the words "public policy" only and by the said words it was intended to mean "the public policy of India". The New York Convention has further curtailed the scope of enquiry by excluding contravention of law of the court in which the award is sought to be enforced as a ground for refusing recognition and enforcement of a foreign award. The words "law of India" have, therefore, been omitted in section 7(1)(b)(ii ) of the Foreign Awards Act. It cannot, therefore, be said that by using the words "public policy" only, section 7(1)(b)( ii) of the Foreign Awards Act seeks to make a departure from the provisions contained in the Protocol and Convention Act, 1937, and, by using the words "public policy" without any qualification, Parliament intended to broaden the scope of enquiry so as to cover public policy of other countries, i.e., the country whose law governs the contract or the country of the place of arbitration. In the UK, the Arbitration Act, 1975, has been enacted to give effect to the provisions of the New York Convention. Section 5(3) of the said Act provides as un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nglish Law, volume III, page 55). Since the doctrine of public policy is somewhat open-textured and flexible, judges in England have shown a certain degree of reluctance to invoke it in domestic law. There are two conflicting positions which are referred to as the "narrow view" and the "broad view". According to the narrow view courts cannot create new heads of public policy whereas the broad view countenances judicial law making in this area. (See Chitty on Contracts, 26th edition, volume I, para 1133, pages 685-686). Similar is the trend of the decision in India. In Gherulal Parakh v. Mahadeodas Maiya [1959] Suppl 2 SCR 406, 440 ; AIR 1959 SC 781, 795, this court favoured the narrow view when it said : "... though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interest of stability of society not to make any attempt to discover new heads in these days". In later decisions this court has, however, leaned towards the broad view (see Murlidhar Agarwal v. State of U.P. [1975] 1 SCR 575, at page 584 ; Central Inland Water Transport Corporation v. Brojo Nat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gn right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal". The particular rule of public policy that the defendant invokes may be of this overriding nature and therefore enforceable in all actions, or it may be local in the sense that it represents some feature of internal policy. If so it must be confined to cases governed by the domestic law and it should not be extended to a case governed by foreign law. In order to ascertain whether the rule is all-pervading or merely local, it must be examined in the light of its history, the purpose of its adoption, the object to be accomplished by it and the local conditions. (See Cheshire and North Private International Law, 12th edition, page 129). The cases in which the English courts refuse to enforce a foreign acquired right on the ground that its enforcement would affront some moral principle the maintenance of which admits of no possible compromise, have been classified as under- "(i)Where the fundamental c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lement of illegality or that the enforcement of the award would be clearly injurious to the public good or, possibly, that enforcement would be wholly offensive to the ordinary reasonable and fully informed member of the public on whose behalf the powers of the State are exercised". The approach of the American courts to the doctrine of public policy in its application to recognition and enforcement of foreign arbitral awards under the New York Convention is reflected in the decision of the US Court of Appeals in Parsons and Whittemore Overseas Co. Inc. v. Societe Generate de l'Industrie du Papier (Rakta ) and Bank of America [1974] 508 F. 2d 969, wherein it has been observed (at pages 973-74) : "The general pro-enforcement bias informing the Convention and explaining its supersession of the Geneva Convention points toward a narrow reading of the public policy defense. An expansive construction of this defense would vitiate the Convention's basic effort to remove preexisting obstacles to enforcement. We conclude, therefore, that the convention's public policy defense should be construed narrowly. Enforcement of foreign arbitral awards may be denied on this basis only where....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fficult to construe the expression "public policy" in article V(2)(b) of the New York Convention to mean international public policy. In our opinion the said expression must be construed to mean the doctrine of public policy as applied by the courts in which the foreign award is sought to be enforced. Consequently, the expression "public policy" in section 7(1)(b)( ii) of the Foreign Awards Act means the doctrine of public policy as applied by the courts in India. This raises the question whether the narrower concept of public policy as applicable in the field of public international law should be applied or the wider concept of public policy as applicable in the field of municipal law. Keeping in view the object underlying the enactment of the Foreign Awards Act, this court has also favoured a liberal construction of the provisions of the said Act. In Renusagar case I [1985] 1 SCR 432, 492 ; AIR 1985 SC 1156, 1181, it has been observed : "It is obvious that since the Act is calculated and designed to subserve the cause of facilitating international trade and promotion thereof by providing for speedy settlement of disputes arising in such trade through arbitration, any expres....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of public policy is applied in the field of private international law. Applying the said criteria, it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law ; or (ii) the interests of India ; or (iii) justice or morality. V. Is the award contrary to public policy of India ? Having examined the scope of public policy under section 7(1)(b )(ii) of the Foreign Awards Act, we will now proceed to consider the various grounds on the basis of which the said provision is invoked by Renusagar to bar the enforcement of the award of the Arbitral Tribunal. As indicated earlier, Renusagar has invoked the said provision on the ground that enforcement of the award would be contrary to the public policy for the reason that such enforcement, (a)would involve contravention of the provisions of the Foreign Exchange Regulation Act; (b)would amount to penalising Renusagar for not disregarding the interim orders passed by the Delhi High Court in the writ petition filed by Renusagar ; (c)would enable recovery of compound interest on interest ; ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e." The following principle of private international law is applicable in relation to such legislation : "Rule 212(1 ).- A contractual obligation may be invalidated or discharged by exchange control legislation if- (a)such legislation is part of the proper law of the contract ; or (b)it is part of the law of the place of performance ; or (c)it is part of English law and the relevant statute or statutory instrument is applicable to the contract. Provided that foreign exchange legislation will not be applied if it is used not with the object of protecting the economy of the foreign State, but as an instrument of oppression or discrimination." (See Dicey and Morris, The Conflict of Laws, 11th edition, volume II, page 1466) In the comments on the said rule, it is stated : "An English court would clearly refuse to enforce a contract the making or performance of which was prohibited by the Exchange Control Act, 1947 (now suspended), or by any statutory instrument made in virtue of that Act, or which was prohibited by earlier United Kingdom exchange control legislation. This would apply irrespective of the proper law of the contract and irrespective of the place of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he sale and purchase of metals with the plaintiffs and a sum of 195,000 pounds was payable by the defendant to the plaintiffs in respect of those contracts. Before entering into the said contracts, the defendants had, however, not obtained ministerial authorisation as required by the Italian Exchange Control Regulations. An action was brought in the English court by the plaintiffs against the defendant in which the defendant pleaded that it was unlawful for him under Italian law to enter into any of the contacts which were "exchange contracts" within the meaning of article VIII, section 2(b) of the Bretton Woods Agreement and unenforceable by reason of the Bretton Woods Agreements Order in Council, 1946. The said plea of the defendant was rejected by the trial judge who gave judgment in favour of the plaintiffs and the said judgment was affirmed by the Court of Appeal. It appears that the judgment of the English court was sought to be enforced by the plaintiffs in Italy but the Italian courts refused to recognise and enforce the said judgment on the view that since the contracts were entered into in violation of the Italian Exchange Control Regulations their enforcement would amoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Legal Aspect of Money, 5th edition (1922), page 403, note 31) As laid down by this court, the Foreign Exchange Regulation Act is a statute enacted for the "national economic interest" and the object of various provisions in the said Act is to ensure that the nation does not lose foreign exchange which is very much essential for the economic survival of the nation. (See Life Insurance Corporation of India v. Escorts Ltd. [1986] Supp. 3 SCR 909, at page 981 ; [1986], 59 Comp. Cas. 548 and M. G. Wagh v. Jay Engineering Works Ltd. [1987] 62 Comp. Cas. 658, 662; [1987] 1 SCR 981, at page 987]. Keeping in view the aforesaid objects underlying the Foreign Exchange Regulation Act and the principles governing enforcement of exchange control laws followed in other countries, we are of the view that the provisions contained in the Foreign Exchange Regulation Act have been enacted to safeguard the economic interest of India and any violation of the said provisions would be contrary to the public policy of India as envisaged in section 7(1)(b)( ii) of the Act. The submissions urged by Shri Venugopal to show that there has been a violation of the provisions of the Foreign Exchange Regulati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the ICC as arising not merely 'out of' but under the contract." Shri Venugopal has, however, urged that the earlier approval to the terms of the contract was of no consequence in view of the subsequent refusal by the Government on August 1, 1969, to approve the agreement between General Electric and Renusagar with regard to the rescheduling of the dates of payment of instalments 1, 2, 4 and 5. This contention also stands concluded by the decision in Renusagar case I wherein it has been observed (at page 457) : "In July, 1969, Renusagar sought the Central Government's approval to the rescheduling of the dates of payment as embodied in the October, 1968 amendment as also in the memorandum of the meeting held in December, 1968, but by letters dated August 1, 1969, and August 4, 1969, the Central Government declined to approve the rescheduling of the dates of payment on the ground that it would result in larger outflow of foreign exchange and advised Renusagar to effect payments as per the original schedule including instalments which had since fallen due. The result was that the original schedule of payment remained operative and there was delay on the part of the Renusagar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he award can be made. The High Court in this regard has placed reliance on the provisions of section 47(3) of the Foreign Exchange Regulation Act which provides as follows : "Neither the provisions of this Act nor any term (whether express or implied) contained in any contract that anything for which the permission of the Central Government or the Reserve Bank is required by the said provisions shall not be done without that permission, shall prevent legal proceedings being brought in India to recover any sum which, apart from said provisions and any such term, would be, due, whether as debt, damages or otherwise, but- (a)the said provisions shall apply to sums required to be paid by any judgment or order of any court as they apply in relation to other sums ; (b)no steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as the Central Government or the Reserve Bank, as the case may be, may permit to be paid ; and (c)for the purpose of considering whether or not to grant such permission, the Central Government or the Reserve Bank, as the case maybe, may requir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the present case because it postulates a situation where permission of the Central Government has not been sought and that in the present case permission was sought but was refused earlier. In our view the earlier refusal by the Government to give its approval to the rescheduling of payment of instalments does not in any way preclude the Government of India from considering the matter in the light of the subsequent developments and it cannot be said that merely because the Government of India had refused to give its approval to rescheduling of payment of instalments it would not grant permission under section 47(3) of the Foreign Exchange Regulation Act, to the enforcement of the judgment that may be passed in these proceedings. It has also been urged that section 47(3) of the Foreign Exchange Regulation Act, is applicable where the legal proceedings are brought in India to recover a sum which is "due", i.e., as liquidated sum presently owing and the said provision would not apply to an obligation to pay on a future date. We do not find any support for this submission from the language of section 47(3) of the Foreign Exchange Regulation Act, wherein the words used are "to recover....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the said order both dated September 11, 1969, or from preventing the payment by the petitioner of tax-free interest of 6 per cent. per annum to IGE in accordance with the approval granted by the respondent's orders dated September 8, 1965, and June 7, 1967, and to grant an ex-parte order pending notice." On February 24, 1970, the following interim order was passed in CM. No. 286 of 1970: "There shall be interim injunction as prayed for. Mr. Kirpal to file his could by March 24, 1970." The matter came before the court after notice on May 18, 1970, on which date the following order was passed : "Mr. Ravinder Narain states that he will give security of the assets of the company to the satisfaction of the Commissioner of Income-tax, Lucknow, for Rs. 4 lakhs. Let this be done within a month from today. Interim injunction and stay to continue. In default of compliance, as above, petition for stay will stand dismissed." From the prayer contained in C. M. 286-W and the orders dated February 24, 1970, and May 18, 1970, passed on the said application, it would appear that pending the hearing and final disposal of the writ petition, there was an interim injunction restraining....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t (compound interest) is not permissible under the law of New York as well as the law in India and is also contrary to public policy of the State of New York as well as the public policy of India. While construing the provisions of section 7(1)(b)( ii) of the Foreign Awards Act, we have held that under the said provisions the enforcement of a foreign award can be objected to only on the ground of such enforcement being contrary to public policy of India and that public policy of other countries e.g., country of the law of contract of the courts of the place of arbitration cannot be taken into consideration. For that reason an objection to the enforceability of the award of the Arbitration Tribunal cannot be entertained on the ground it is contrary to the public policy of the State of New York. We would, however, examine whether award of interest on interest or compound interest is contrary to public policy of India. Before we refer to the law in India in this regard, we may take, note of the law in England to which reference has been made by Shri Venugopal during the course of his submissions. At common law in England the principle that is applied is that laid down in "the reluctan....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... decisions of the House of Lords in London, Chatham and Dover Rail Co. v. South-Eastern Rail Co. [1893] AC 429-(HL) and President of India v. La Pintada Compania [1984] 2 All ER 773 have observed (at page 218) : "But we see no reason for allowing the reluctance of the common law to extend to cases where the defendant's breach of contract or negligence has caused the plaintiff to pay away or the defendant to withhold money and, as a result, the plaintiff has been deprived of the use of the money so paid away or withheld". They upheld the decision of the full court of South Australia awarding damages for the added cost of funding the business with borrowed money as a result of the loss of the use of money overpaid in tax by awarding compound interest for the reason that simple interest would not reflect accurately the extent of the respondent's loss since simple interest almost under compensates the injured party's true loss. It was observed (at page 218) : "The disdain of the common law for interest especially compound interest, is a relic from the days when interest was regarded as necessarily usurious." Brennan and Deane JJ. have expressed their general agreement with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....75 and Union of India v. West Punjab Factories Ltd., AIR 1966 SC 395, and it has been held that in the absence of any agreement, express or implied, or for any provision of law, it is not possible to award interest by way of damages. This would show that there is no absolute bar on the award of interest by way of damages and it would be permissible to do so if there is usage or contract, express or implied, or of any provision of law to justify the award of such interest. Merely because in section 3(3)(c) of the Interest Act, 1978, the court is precluded from awarding interest on interest does not mean that it is not permissible to award such interest under a contract or usage or under the statute. It is common knowledge that provision is made for the payment of compound interest in contracts for loans advanced by banks and financial institutions and the said contracts are enforced by courts. Hence, it cannot be said that award of interest on interest, i.e., compound interest, is against the public policy of India. We are, therefore, unable to accept the contention that award of interest on interest, i.e., compound interest, is contrary to public policy of India and the award in re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the decision of the Supreme Court of Romania dated February 16, 1985, which is extracted, in brief, in the Year Book of Commercial Arbitration, volume XIV, 1989, pages 689 to 691, Shri Venugopal has submitted that unjust enrichment is contrary to public policy of India and since the enforcement of award of the Arbitral Tribunal would result in unjust enrichment of General Electric it cannot be enforced under section 7(1)(bXii) of the Foreign Awards Act. This contention of Shri Venupogal has a bearing on the award of delinquent interest under item No. 3, as well as on the award of compensatory damages under items Nos. 2 and 4 and award of costs under item No. 7. In the case decided by the Romanian Supreme Court, a Lebanese shipowner had agreed by a charter party with the Romanian State enterprise to transport from Costantza (Romania) to Bandar Abbas (Iran) certain goods which had been sold C & F to an Iranian buyer. The voyage was interrupted at Tripoli (Lebanon) where the shipowner had its seat. At Tripoli all merchandise disappeared, according to the shipowner because of war, and according to the Romanian enterprise because of a local fraudulent sale. The dispute was referred ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e I, page 1313, para 2037, it has been stated that "the principle of unjust enrichment is not yet clearly established in English Law". The learned editors have, however, expressed the view (at pages 1313-14 para 2037) : "Even if the law has not yet developed to that extent, it does not follow from the absence of a general doctrine of unjust enrichment that the specific remedies provided are not justifiable by reference to the principle of unjust enrichment even if they were originally found without primary reference to it." In Indian law the principle of unjust enrichment finds recognition in the Indian Contract Act, 1872 (sections 70 and 72). We do not consider it necessary to go into the question whether the principle of unjust enrichment is a part of the public policy of India since we are of the opinion that even if it be assumed that unjust enrichment is contrary to public policy of India, Renusagar cannot succeed because the unjust enrichment must relate to the enforcement of the award and not to its merits in view of the limited scope of enquiry in proceedings for the enforcement of a foreign award under the Foreign Awards Act. The objections raised by Renusagar bas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xes Hanover would have paid for computation of damages, on the view that since only after-tax profits can be reinvested or distributed to shareholders, Hanover was damaged only to the extent of the after-tax profits that it failed to receive. The US Supreme Court reversed the said decision of the Court of Appeal and held that the District Court did not err on the question of computation. The court obser ITO (at page 1247) : "As Hanover points out, since it will be taxed when it recovers damages from United for both the actual and the trebled damages, to diminish the actual damages by the amount of the taxes that it would have paid had it received greater profits in the years it was damaged would be to apply a double deduction for taxation, leaving Hanover with less income than it would have had if United had not injured it." Since General Electric would be liable to pay U. S. tax on the amount of compensatory damages awarded under items Nos. 2 and 4 of the award, it cannot be said that there would be unjust enrichment by General Electric on account of non-deduction of US tax payable on the amount of regular interest and delinquent interest while assessing compensatory damages....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... General Electric. We have considered this objection of Renusagar and we do not feel that it can be a found for refusal of enforcement of the award under section 7(1)(b)( ii) of the Foreign Awards Act. For the reasons aforesaid, none of the objections raised by Renusagar against the enforcement of the award under section 7(1)(b)( ii) of the Foreign Awards Act for the reason that such enforcement is contrary to public policy of India merits acceptance. VI. Relevant date for conversion of the amount awarded from foreign currency to Indian currency. In the field of conflict of laws money serves a two-fold function, viz., (i) of a means of measurement ; and (ii) of a medium of payment. The currency in which a debt is expressed or a liability to pay damages is calculated is called the "money of account" or "money of contract" or "money of measurement" and the currency in which the said debt or liability is to be discharged is called the "money of payment". The money of account is to be ascertained from the terms of the contract construed in accordance with the proper law of the contract and the money of payment is determined by the law of the country in which such debt or liabi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as the money of payment is the same, namely, US dollar. Here, the question of convertibility from US dollars to Indian rupees arises in the context of enforcement of the award of the Arbitral Tribunal which is in US dollars. We are, therefore, required to examine the position under the Indian law with reference to conversion of foreign currency into Indian currency at the stage of enforcement of a judgment or award in foreign currency. Prior to 1975, the law in England was that an English court will not give judgment for the payment of an amount expressed in foreign currency and the amount of any foreign currency had to be converted in sterling on or before the date of judgment and the date for the purpose of such conversion was the date when the cause of action arose. This was the law laid down by the House of Lords in United Railways of Havana and Regla Warehouses Ltd., In re [1960] 2 All ER 332 ; [1961] AC 1007. This decision was overruled by the House of Lords (by majority) in 1975 in Miliangos v. George Frank (Textiles ) Ltd. [1975] 3 All ER 801 ; [1976] AC 443. In that case, a Swiss seller had agreed to supply English buyers with goods at a price expressed in the contract....
X X X X Extracts X X X X
X X X X Extracts X X X X
....claims for damages for breach of contract or for tort. In his dissenting opinion, Lord Simon, has reiterated the law laid down in United Railways of Havana and Regla Warehouses Ltd.'s case (supra). It may be of interest to note that Lord Wilberforce, who gave the leading speech in Miliangos v. George Frank (Textiles) Ltd. [1975] 3 All ER 801 (HL), had appeared in United Railways of Havana and Regla Warehouses Ltd.'s case (supra) but failed to persuade the House of Lords to accept his contention. He, however, succeeded 15 years latter, in having his views accepted by the House of Lords. Subsequently in Owners of the M V Eleftherotria v. Owners of the M V Despina R [1979] AC 685 ; [1979] 1 All ER 421, the House of Lords has extended the rule laid down in Miliangos v. George Frank (Textiles) Ltd. [1975] 3 All ER 801 to claims for damages for tort and breach of contract. The rule laid down in Miliangos v. George Frank (Textiles ) Ltd. [1975] 3 All ER 801 (HL) has been held to be applicable to an action at common law on a foreign judgment (see Dicey and Morris, The Conflict of Laws, 11th edition, volume 2, page 1461). In relation to arbitral awards, the matter had come up before the Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....currency into domestic currency which avoids injustice and which is in step with commercial needs. The federal law in the United States is thus explained by Prof. F. A. Mann : "Where the breach or wrong occurred in a foreign country (especially by non-payment of money due there), the damages are measured in the currency of that country and the dollar equivalent calculated at the rate of exchange obtaining at the date of judgment can be recovered ; where the breach or wrong occurred in the United States (especially by non-payment of foreign money due there), the damages, being measured in dollars, are to be converted at the rate of exchange of the date of breach or wrong". (See Mann, Legal Aspects of Money, 5th edition, page 347). According to the learned author, the first part of the above statement is based on the decision of the US Supreme Court in Deutsche Bank Filiale Nurenberg v. Humphrey [1926] 272 US 517 and the latter part of the statement is supported by the decision of the US Supreme Court in Hicks v. Guiness [1925] 271 US 711. Most of the States, including the State of New York (till recently), follow the old English rule and apply the rate of exchange prevai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enominated in a currency other than currency of the United States, a court shall render or enter a judgment or decree in the foreign currency of the underlying obligation. Such judgment or decree shall be converted into currency of the United States at the rate of exchange prevailing on the date of entry of the judgment or decree." As a result of this amendment, instead of the breach-date rule which was prevailing earlier the judgment-date rule has been introduced. This amendment came into operation on July 20, 1987. It was introduced' at the request of the New York State Bar Association and the Erie County Bar Association and it was supported by the Association of the for of the City of New York. According to the chairman of the Committee on International Trade and Transactions of the New York State Bar Association the said amendment was necessary because in view of the decision of the House of Lords in Miliangos' case (supra) "a number of transactions which would otherwise be governed by New York law, and, involve professional and financial advisors in New York, have been structured in England and covered by English law". In India, the law relating to conversion of foreign ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plications which may be filed, the longevity of the litigation is doubled, if not tripled, so that none can with any pertains predict even a probable date for its termination. As regards the third date, namely, the date of the decree, the court observed that a decree crystalizes the amount payable by the defendant to the plaintiff and it is the decree which entitles the judgment-creditor to recover the judgment debt through the processes of law. Dealing with the objection that the date of the decree of the trial court is not a final decree for there may be appeals or other proceedings against it in superior courts and by the time the matter is finally determined, the rate of exchange prevailing on that date may be nowhere near that which prevailed at the date of the decree of the trial court, it was observed that this difficulty is easily overcome by selecting the date when the action is finally disposed of, in the sense that the decree becomes final and binding between the parties after all remedies against it are exhausted. As regards the fourth date, i.e., the date when the court orders execution to issue, it was felt that execution of a decree is not a simple matter because it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Cas) : ".... the plaintiff, who has not received the amount due to him in a foreign currency and, therefore, desires to seek the assistance of the court to recover that amount, has two courses open to him. He can either claim the amount due to him in Indian currency or in the foreign currency in which it was payable. If he chooses the first alternative, he can only sue for that amount as converted into Indian rupees and his prayer in the plaint can only be for a sum in Indian currency. For this purpose, the plaintiff would have to convert the foreign currency amount due to him into Indian rupees. He can do so either at the rate of exchange prevailing on the date when the amount became payable for he was entitled to receive the amount on that date or, at his option, at the rate of exchange prevailing on the date of the filing of the suit because that is the date on which he is seeking the assistance of the court for recovering the amount due to him. In either event, the valuation of the suit for the purposes of court-fees and the pecuniary limit of the jurisdiction of the court will be the amount in Indian currency claimed in the suit. The plaintiff may, however, choose the seco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....defendant not wanting to make payment in foreign currency even-though such permission has been granted or the defendant not making payment in foreign currency or in Indian rupees, whether such permission has been granted or not, the equivalent of such foreign currency sum converted into Indian rupees at the rate of exchange proved before the court as aforesaid. In the event of the decree being challenged in appeal or other proceedings and such appeal or other proceedings being decided in whole or in part in favour of the plaintiff, the appellate court or the court hearing the application in the other proceedings challenging the decree should follow the same procedure as the trial court for the purpose of ascertaining the rate of exchange prevailing on the date of its appellate decree or of its order on such application or on the date nearest or most nearly preceding the date of such decree or order. If such rate of exchange is different from the rate in the decree which has been challenged, the court should make the necessary modification with respect to the rate of exchange by its appellate decree or final order. In all such cases, execution can only issue for the rupee equivalent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ms of US dollars the learned single judge has not considered the matter of conversion of US dollars into Indian currency. The Division Bench has, however, adverted to this aspect and applying the law laid down in Forasol's case (supra) the decree has been passed in terms of US dollars as well as Indian rupees on the basis of the rupee-dollar exchange rate prevailing on the date of the decree passed by the learned single judge. The said date was applied for the reason that according to the Division Bench the Letters Patent Appeal filed by Renusagar was not maintainable. It appears that both the parties are not satisfied with said view of the Division Bench of the High Court in applying the decision in Forasol's case (supra) to the present case. Shri Venugopal has urged that in Forasol's case (supra) this court was dealing with the enforcement of an award governed by the Indian Arbitration Act and that the principles laid down in the said decision cannot be applied to the present case arising out of a foreign award which is not governed by the provisions of the Indian Arbitration Act but is governed by the provisions of the Foreign Awards Act. It is no doubt true that in the Fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y lex fori, i.e., the law of the forum. The rule laid down in Miliangos' case (supra) has been described as a rule of procedure. (See Owners of Eleftheratria v. Despina R. [1979] 1 All ER 421, at page 704 ; Cheshire and North's Private International Law, 12th edition, page 100. For the same reasons, the principles laid down in Forasol's case (supra) must be held to be rules of procedural law and would be applicable to proceedings for enforcement of a foreign award under the Foreign Awards Act. The passage from Legal Aspects of Money by F. A. Mann, on which reliance has been placed by Shri Venugopal reads thus (at pages 326-27): "This situation involves two distinct questions : which is the legal system that determines whether there exists a right or a duty to convert the money of account into the (local) money of payment ? which is the legal system that governs the mechanics of the conversion (the type of the rate of exchange to be employed, the date and the place with reference to which the rate is to be ascertained) ? As regards the first point it is necessary to repeat that, except in unusual circumstances, the creditor suffers no prejudice from payment in the moneta lo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he stage of payment or enforcement that conversion into sterling at the rate of exchange then prevailing, takes place. This is so whether the claim is for payment of a specific sum contractually due or for damages for breach of contract or tort or for a just sum due in respect of unjustified enrichment or for restitution. Nor does it matter whether the contract sued upon is governed by English or by foreign law. Nor is it necessary to ask for specific performance rather than payment : in either case the defendant will be ordered to pay foreign money. Moreover an award in an English arbitration may be expressed and enforced in foreign currency and a foreign award or judgment so expressed may be enforced like the English award or judgment." The entire position has been thus summed up by Dr. Mann (at page 436) : "As regards the date with reference to which the rate of exchange is to be ascertained, the law is to a large extent settled. In connection with conversion for the purpose of proceedings the payment-date rule is firmly established. Outside proceedings the date depends on the construction of the contract, but there exists a strong tendency to apply the payment-date rule".....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the law laid down in Forasol's case (supra ) that the conversion should be On the basis of the exchange rate prevailing on the date of judgment-does not lay down the correct law and that it needs reconsideration. In this regard, Shri Shanti Bhushan has urged that the purpose of the rule relating to conversion of foreign currency into Indian rupees at the stage of enforcement of a foreign award should be to ensure that the amount that has been awarded under the award in foreign currency is available in full to the creditor, and this can be achieved only if the exchange rate for the purpose of such conversion is that prevailing on the date of payment as held by the House of Lords in Miliangos' case (supra) . According to Shri Shanti Bhushan, the practical and procedural difficulties pointed out by this court for rejecting the date of payment rule are not of much significance so as to render the said rule inapplicable. Shri Shanti Bhushan has also relied on the following passage from The Conflict of Laws by Dicey and Morris, 11th edition, volume II, page 1454 : "If a debt or other liability expressed in a foreign currency is payable in England, the debtor may tender pounds in di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Since this is the only question raised in C. A. No. 379 of 1992 filed by General Electric, the said appeal must fail. VIII. Interest pendente lite and future interest In an international commercial arbitration, like any domestic arbitration, the award of interest would fall under the following periods : (i)period prior to the date of reference to arbitration ; (ii)period during which the arbitration proceedings were pending before the arbitrators ; (iii)period from the date of award till the date of institution of proceedings in a court for enforcement of the award ; (iv)period from the date of institution of proceedings in a court till the passing of the decree ; and (v)period subsequent to the decree till payment. The interest in respect of the period covered by item (i ), namely, prior to the date of reference to arbitration would be governed by the proper law of the contract and the interest covered by items (ii) and (iii), i.e. , during the pendency of the arbitral proceedings and subsequent to the award till the date of institution of the proceedings in the court for the enforcement of the award would be governed by the law governing the arbitral proce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded interest by way of compensatory damages in respect of the period prior to the date of reference as well as for the period covered by the arbitral proceedings up to March 31, 1986. In respect of the period subsequent to March 31, 1986, the Arbitral Tribunal has awarded interest only on item No. 1 (regular interest), item No. 3 (delinquent interest) and item No. 5 (costs of spare parts) until the payment. No direction with regard to the payment of interest pendent elite, i.e., for the period the proceedings were pending in the Bombay High Court till the date of decree as well as for the period subsequent to the decree, has been given either by the learned single judge or by the Division Bench of the High Court. Taking into consideration, the facts and circumstances of the case we are not inclined to interfere with that part of the judgment of the High Court and to award interest for the period the proceedings for enforcement of the award were pending in the Bombay High Court and in this court. Shri Shanti Bhushan has, however, placed reliance on the interim order passed by this court on February 21,1990, whereby this court stayed the operation of decree and order under appeal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the arbitration award in the Bombay High Court, i.e., up to October 15, 1986. As regards future interest, we are inclined to take the view that for the period subsequent to the date of this judgment Renusagar should pay interest at 18 per cent. on the decretal amount that remains due after adjusting the sum of Rs. 10,69,26,590 paid by Renusagar to General Electric in pursuance of the directions given by this court on February 21, 1990, and November 6, 1990, till payment of the said balance amount. IX. Adjustment of the sum of Rs. 10,69,26,500 deposited by Renusagar against the decretal amount : As indicated earlier, in pursuance of the orders of this court dated February 21,1990, Renusagar deposited a sum of Rs. 9,69,26,590 on March 20, 1990, and a further amount of Rs. 1,00,00,000 was deposited by Renusagar in pursuance of the order dated November 6, 1990, on December 3, 1990. These amounts have been withdrawn by General Electric. The question is how and at what rate the said amount should be adjusted against the decretal amount. It is not disputed that on the date when the said deposits were made by Renusagar and were withdrawn by General Electric, the rupee dollar e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....800.00. The judgment of the High Court passing a decree in terms of the award is, therefore, affirmed. This would cover the amount awarded by the Arbitral Tribunal in US dollars and interest on amounts awarded under items Nos. 1, 3 and 5 for the period from April 1, 1986, to October 15, 1986, the date of filing of the petition by General Electric for enforcement of the award in the Bombay High Court. The amount paid by Renusagar during the pendency of these appeals will have to be adjusted against the said decretal amount and the present liability of Renusagar under this decision has to be determined accordingly. Calculating on this basis, the amount payable by Renusagar under the decree in terms of US dollars is: Amount awarded by the Arbitral Tribunal 12,215,622.14 Interest on US $2,716,914.72 (the total amount awarded under items Nos. 1, 3 and 5) at %per annum from 1-4-86 to 15-10-1986 interms of the award 117,735.00 12,333,355.14 Less : Amount paid by Renusagar in pursuance of the orders dated 21-2-1990 and 6-11-1990during the pendency of the appeals in this court 6,289,800.00 6,043,555.14 In accordance with ....