TMI Blog1983 (10) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... in Indian rupees. Even with respect to such twenty per cent Forasol did not want to be dependent upon a possible fluctuation in the exchange rate of rupee and, therefore, the 20 per cent part of the amount computed in French Francs was covenanted to be converted at a fixed rate provided in the said Article IX-3.1. It is thus only the 20 per cent of the said fees and charges computed in French Francs in Forasol's invoices but payable in Indian rupees which was to be converted at the aforesaid rate of exchange specified in the said contract. The contention of ONGC that the fixed rate of conversion provided in Article IX-3.1 applied to all payments to be made under the said contract to Forasol must, therefore, be rejected. The Division Bench of the Delhi High Court was, the in error in holding that the enhanced rate of exchange specified in the said award applied only to the amount of interest payable to Forasol. Thus this enhanced rate of exchange applied to the payments in Indian rupees under Article IX-3.1 of the said contract to be made by ONGC to Forasol from and after November 30,1966. The learned Single Judge rightly took the date of the decree as the date of conversion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portation from a sea port or airport in France to India and back to a sea port in France or outside France if Forasol so chose, in respect of the rig, equipment, machinery, tools and other materials provided by Forasol were to be reimbursed to Forasol by ONGC in Indian rupees, if the expenditure was initially incurred by Forasol in Indian rupees, otherwise in French Francs. Under a Credit Agreement arrived at between the Government of India and the Government of France, the Government of France had agreed to provide credit facilities to a limited extent to the Government of India for the import of plant, machinery, equipment and materials and for execution of certain projects including oil exploration. Under the said Credit Agreement, credit was to be given by the French suppliers to the Indian buyers in the form of acceptance of payments on deferred basis upon the conditions laid down in the letters dated February 5, 1962, exchanged between the Governments of India and France. Consequently, in respect of the said contract, Forasol had agreed under Article X-1.1 thereof to accept payment of its fees, costs and charges payable in French Francs on deferred basis under the overall c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the promissory notes to CNEP (Paris) for collecting payment on the dates of maturity ONGC shall place with CNEP (Paris), at least one day before each date of maturity, adequate funds to cover the total value of the promissory notes maturing on that date." Under Article X-4.3 ONGC undertook to pay to Forasol in French Francs simple interest at the rate of 5 per cent per annum and also a credit insurance charge at the rate of 1.08 per cent per annum. The other sub-articles of Article X-4.3 provided for calculation of interest and insurance charges and for submission by Forasol every six months of invoices in respect thereof. Article X-4.3.2, inter alia, provided that- "ONGC shall accept each invoice for the interest and insurance charge and shall remit the invoiced amount to Forasol in French Francs as early as possible but not later than two months after receipt of the invoice." Provision was also made by the said Article X-4.3.2 for drawing of promissory notes payable at CNEP (Paris) maturing on each 5th day of August and of February, the first of such dates being August 5, 1965 and the last being August 5, 1971. Under Article X-4.3.3 ONGC bound itself, "irrevocably, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Addendum No. 3 Provided as follows: "2.5, In case Forasol has to refund to ONGC an amount which cannot be adjusted or has not been adjusted against Forasol's invoices for the period of extension stipulated in Article 1.2 above, Forasol shall refund the amount in cash in the same currency in which ONGC had paid it earlier." It may be mentioned that each of the said supplementary agreements provided that all the terms and conditions of the original contract which were not repugnant to the terms and conditions agreed to for such supplementary agreements were to continue to apply until the termination of the said contract. The extended period of the said contract expired on April 13, 1967. In June 1966, during the extended period of the said contract, the Indian rupee was devalued, and consequently in the course of correspondence which took place between the parties Forasol made a claim for conversion of Indian rupees into French Francs at a rate higher than the rate specified in Article IX. 3 of the said contract. It may also be mentioned that ONGC paid to the income- tax authorities towards the income-tax liabilities of Forasol three sums aggregating to Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto French Francs at the rate of Rupee 1. 5178 equal to FF 1.000 being the enhanced rate of exchange specified in the said award. After deducting the amounts payable to ONGC the balance payable to Forasol was shown as FF 5, 89, 727.51 being the equivalent of Rs. 11, 79, 455 with interest on the principal sum upto the date of payment and the costs of execution. The mode of execution specified in the said execution application was attachment and sale of the movable properties belonging to ONGC and specified in an annexure to the said execution application. In its objections to the said execution application ONGC contended that the enhanced rate of exchange specified in the said award was only with respect to the interest payable to Forasol from November 30, 1966, and that to the rest of the payments to be made under the said award the rate of exchange mentioned in Article IX-3.1, namely, FF 1.033 equal to Rupee 1.000, was applicable and that this contract rate of exchange applied both to the French Franc part as also the Indian rupee part of the said contract. ONGC also raised certain other contentions. On the basis of these contentions, it was submitted by ONGC that instead of any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es by ONGC to Forasol. 2. The Umpire by the said award fixed the rate of exchange at FF 1.000 equal to Rs. 1.5178 as from November 30, 1966, in respect of such rupee payments only. 3. The sum of Rs. 10,19,380.39, being the balance amount of the sum of Rs. 11,95,304 which remained payable to ONGC by Forasol in respect of the income-tax paid by ONGC on behalf of Forasol after making adjustments against the claim of Forasol, was to be adjusted, as directed by the said award, against Forasol's claim in French Francs on the respective dates of each payment of tax, namely, on September 14, 1967, February 14, 1968, and March 23, 1968, and as all these payments were made after November 30, 1966, and as under the said award the enhanced rate of exchange was directed to apply to both parties, the said sum of Rs. 10,19,383.39 was to be adjusted against the French Franc claim of Forasol at the enhanced rate of FF 1.000 equal to Rs. 1.5178. 4. So far as the payment to Forasol in French Francs was concerned, neither the said contract nor the said award provided for conversion of French Francs into Indian rupees and the said decree having been passed in foreign currency, in case ONGC did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntinuous stability of which it could not be certain. The foreign party would, therefore, naturally desire and bargain for payment in the currency of its own country, namely, in French currency. The more so, as under the Credit Agreement entered into between the Government of France and the Government of India the Government of France had agreed that credit should be given by French suppliers to Indian buyers by accepting payment on deferred basis for the import of plant, machinery, equipment and materials and execution of certain projects including oil exploration, and, accordingly, under Article X-1.1. of the said contract the French party, Forasol, had agreed to accept on deferred basis payment of the amounts due to it in French Francs. We have earlier referred to the relevant Articles of the said contract as also extracted some of them in order to emphasize that though under the said Article IX-3.1 Forasol had agreed to accept 20 per cent of its operational fee, standby fee and equipment charges in Indian Rupees, it wanted that the remaining 80 per cent of these fees and charges as also the other amounts which were payable to it under the said contract should be paid to it in Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2 of Addendum No. 2 and Article 2.5 of Addendum No. 3 extracted above under which amounts refundable by Forasol to ONGC were to be refunded in the same currency in which ONGC had paid them earlier. The contention of ONGC that the fixed rate of conversion provided in Article IX-3.1 applied to all payments to be made under the said contract to Forasol must, therefore, be rejected. What next falls to be consid e red is whether the enhanced rate of exchange specified by the Umpire in the said award applied only to the amount payable by way of interest to Forasol as contended by ONGC. This contention was rejected by the learned Single judge but found favour with the Division Bench of the Delhi High Court. It is necessary to set out some further facts in order to decide this point During the course of the hearing before the Umpire, ONGC had filed a statement showing the adjustment of the amount of French Francs due to Forasol against the amount of income- tax paid by ONGC on behalf of Forasol. It was, however, erroneously assumed by the Umpire that the said statement was an agreed one. After the Umpire had drafted his award he handed over a copy of it to the parties in order that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of FF 1.033 to a rupee (or FF 1033 for every Rs. 1,000/-) which was the rate of exchange agreed to between three parties under Article XI. 1.1.1 of the Agreement. Messrs Forasol have put forward before me a claim for enhanced rate of interest and their claim is that this should be Rs. 1,5178 for every FF or Rs. 1517,80 for every FF 1,000, I find that there is considerable correspondence in the course of which they have made a claim that after devaluation of the rupee there should be a change in the rate of exchange, Though there is no specific letter in the file agreeing to the enhancement I find that in the later invoices demand has been made subject to the claim for enhanced rate of exchange. In view of this I consider that from 30,11,1966 Rupee portion should be Converted at FF 1 = Rs. 1.5178 or FF 100= Rs. 1.517.80. Of course this rate of exchange would apply to both the parties, Farasol and the O.N.G.C.' 'As stated earlier this has been worked out only upto 30.6.1974 and in accordance with the directions contained in this award interest shall be calculated on the principal amount right upto 21.12.1974 on the entire amount of principal and the entire sum of principal and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate of interest for by the said direction, which too we have emphasized in the above extract, the Umpire awarded that from November 30, 1966, "Rupee portion should be converted at FF 1 = Rs. 1.5178 or FF 1,000 = Rs. 1,5178" and he further awarded that "this rate of exchange would apply to both the parties, Forasol and the O.N.G.C." The question of the enhanced rate of exchange applying to both the parties would not arise if the enhanced rate of exchange was with respect only to the interest payable to Forasol. 548 We are fortified in the conclusion we have reached by the fact that so far as the adjustment of claim of ONGC with respect to income-tax paid by it was concerned, the Umpire by the said Erratum expressly deleted from the said award the portion in which such adjustment was made at the contract rate of FF 1.033 equal to Re. 1,000 and substituted it by fresh paragraphs. Under the said Erratum these amounts were directed to be adjusted from November 30, 1966 at the enhanced rate of exchange provided in the said Erratum as all these amounts were paid by ONGC after the said date. Another fact which fortifies this conclusion is that by the last paragraph of the portion of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, therefore, not directly in issue before us nor the question whether a court can simpliciter pass a decree in terms of such an award without specifying the rate of exchange at which the foreign currency amount will have to be converted into Indian rupees. Though at the first blush these questions do not appear to arise for our determination, they are inextricably linked with the question which we have to decide and we will, therefore, have to address ourselves to them in due course. The question which one out of the dates mentioned above is the proper date to be selected by the court does not appear to have been decided in this country, and no authority of any Indian court on this point has been brought to our notice. The question, however, has formed the subject-matter of decisions in England and both the learned Single Judge as also the Division Bench of the Delhi High Court have referred to the decision of the House of Lords in Miliangos v. George Frank (Textiles) Ltd.(1) and other English cases. They have however, reached differing conclusions, the learned Single Judge holding that the conversion of French Francs into Indian rupees should be made at the rate of exchange pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case is known as the "breach date rule". The next decision which requires to be noticed is that of the Court of Appeal in Jugoslavenska Oceanska Plovibdo v. Castle Investment Co. Inc.(1) As this authority was relied upon by the Division Bench of the Delhi High Court in order to arrive at its decision on this part of the case and as it formed the sheet-anchor of the submission made on behalf of ONGC that the proper date of conversion should be the date of the award, it is necessary to examine what was decided in this case in some detail. In that case, the plaintiffs were awarded a sum expressed in United States dollars in an arbitration held in London. The defendants having failed to pay the sum awarded, the plaintiffs sought leave of the court under section 26 of the Arbitration Act, 1950, of England to enforce the award. In support of their application the plaintiffs filed an affidavit showing the rate of exchange prevailing at the date of the award and the amount of the award in pound sterling and claimed the amount due under the award on the said basis. The questions which fell for determination were whether an award expressed in a currency other than sterling was valid and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract is payable in a foreign currency, it ought to be possible for an English court to order specific performance of it in that foreign currency; and then let the exchange be made into sterling when it comes to be enforced. I know that this is not yet the law. There is high authority against it: see Re United Railways of Havana and Regla Workhouses Ltd. But the House of Lords have since then held that specific performance can be, ordered of a contract to make a money payment: see Beswlck v. Beswick.(1) This may point the way to a relaxation of the old rule and enable the courts, in proper circumstances, to order payment into a foreign currency, such as is suggested by Dr. Mann in his book.(2) At any rate, there is no reason why the rule about judgments of the courts should be extended to awards by arbitrators, I think we should hold that arbitrators have jurisdiction to make an award in a foreign currency whenever that is the proper currency in which payments under the contract should be made. "The next question is the manner of enforcing such an award. It would, no doubt, be possible to bring an action on the award and seek a judgment from the courts in sterling. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M 5.85 and consequently the value of $ 452 had fallen to DM 2,664. If the rule in the Havana case applied the plaintiffs would have got judgment for $ 452 which would have meant only a sum of DM 2,664. whereas if they were able to claim and get judgment in deutschmarks the sterling equivalent of DM 3756.03 would be $ 641. In other words, by getting judgment in sterling, the plaintiffs would lose one-third of the money due to them; whereas by getting it in deutschmarks they would recover the full amount. The plaintiffs declined to give any evidence with reference to the rate of exchange but asked for judgment only in deutschmarks as the Federal Republic of Germany was a member of the European Economic Community, They did so by relying upon article 106 of the Treaty of Rome which by section 2(1) of the European Communities Act, 1972, had been made part of the law of England. The County Court judge held that the said article 106 had no bearing on the rule of common law and that he could give judgment only in sterling and accordingly dismissed the action. The plaintiffs filed an appeal. In this case too the defendant did not appear and was not represented before the Court of Appeal. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deutschmarks and the plaintiffs must be left to extricate themselves from the intricacies of the law relating to execution and exchange control. There was no appeal to the House of Lords against this judgment of the Court of Appeal. We now come to the case of Miliangos v. George Frank (Textiles) Ltd. How that case reached the House of Lords makes interesting reading by itself. Prior to the judgment being delivered in the Schorsch Meier case, Miliangos, a Swiss, brought an action against George Frank (Textiles) Ltd., an English company, claiming the sum of Swiss Francs 415, 522.45 due to him for the price of polyester yarn sold and dilivered to the English company under a written contract. The claim of the Swiss plaintiff was based upon invoices sent to the English company and accepted by that company and alternatively on two bills of exchange drawn in Switzerland by the plaintiff and accepted by the defendants but which had been dishonoured on presentation on their respective due dates. This alternative claim was for the amounts of the said bills of exchange, namely, Swiss Francs 273,619.45 and Swiss Francs 27,394 respectively, and the cost of protesting the bills and interest. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, and when the money of account was that of that country or possibly of some country other than the United Kingdom. The House of Lords further held that the instability which had overtaken the pound sterling and other major currencies since its earlier decision in the Havana case as well as the procedures evolved in consequence thereof by the English courts and by arbitrators in the City of London to secure payment of foreign currency debts in foreign currency, justified departure from that decision in terms of the Practice Statement (Judicial Precedent) (under which the House affirmed its power to depart from a previous decision when it appeared right to do so, recognizing that too rigid an adherence to precedent might lead to injustice in a particular case and unduly restrict the development of the law) since a new and more satisfactory rule could be stated to enable the courts to keep step with commercial needs and would not involve undue practical and procedural difficulties. We are concerned here with what was said in that case with respect to the date to be taken for converting foreign currency into English currency. Lord Wilberforce held (at pages 468-9) that the claim s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the defendant do pay to the plaintiff 416,144.20 Swiss francs or the sterling equivalent at the time of payment", which would mean, as pointed out by Lord. Wilbeforce (at page 368), the date when the court authorizes enforcement of the judgment in terms of sterling, Lord Fracer of Tullybelton opined (at page 502) that to take the date of the commencement of the action might result in consequences as unjust as taking the breach date because between the commencement of an action a period of a year or more might easily elapse, allowing for appeals, before payment was made and that the date of judgment would be better but there seemed no reason why the latest practicable date, namely, the date when the court authorizes the enforcement of the judgment should not be taken. Lord Simon of Glaisdale held in his dissenting judgment that there was no reason for departing from the rule laid down in the Havana case and that this should only be done by Parliament on executive or expert advice. With reference to the Jugoslavenska case Lord Simon observed (at page 489): "If the sterling judgment rule and the breach date rule were to be reconsidered by a properly qualified body, no do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be made in cruzeiros. By then the value of the cruzeiro against the French Francs was half what it had been when the charterers had paid the cargo receivers. The arbitrators made their award in French Francs, On a special case stated Robert Goff J. held that the award should have been made in cruzeiros as being the currency of the loss. On appeal by the charterers the Court of Appeal restored the award of the arbitrators. The owners of the Despina R as also the Swedish ship owners went in appeal to the House of Lords. Both the appeals were dismissed. The House held that in a claim based on tort, it was fairer to give judgment in the currency in which the loss was sustained than in the sterling equivalent at the date of the breach or loss; that the principles to be applied in ascertaining the currency of the loss were those of restitution in integrum and reasonable foreseeability and, therefore, where a plaintiff proved that he conducted his business in a specific currency and it was reasonably foreseeable that he would the that currency to purchase the necessary currency to meet the immediate and direct expenditure caused by the defendant's tort, then judgment should be exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in which it was felt by the plaintiff. In some cases the 'immediate loss' currency may be appropriate, in others the currency in which it was borne by the plaintiff. There will be still others in which the appropriate currency is the currency of the contract. Awards of arbitrators based upon their appreciation of the circumstances in which the foreign currency came to be provided should not be set aside for, as such, they involve no error of law." It will also be useful to refer at this stage to certain Practice Directions given, following upon the Miliangos case, with respect to claims and judgments in foreign currency and enforcement of such judgments. The Miliangos case was decided on November 5,1975, and the Practice Directions in question were issued by the Senior Master of the Supreme Court of judicature (Queen's Bench Division) on December 18,1975, with the concurrence of the Chief Chancery Master acting on the authority of the Vice- Chancellor so far as they applied to the practice in the Chancery Division, and of the Senior Registrar of the Family Division. so far as they applied to the practice in that Division. As pointed out in Halsbury's Laws of England, 4th ed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar certificate is required where the plaintiff desires to enforce a judgment debt expressed in a foreign currency by adopting garnishee proceedings or other modes of execution. The above survey shows the position in English law to be as follows: (1) Until recently the rule that was firmly established was that an English court could give judgment only in English currency and that for the purposes of litigation in England to recover a debt expressed in a foreign currency, such debt had to be converted into sterling with reference to the rate of exchange prevailing on the date when the debt was payable. This rule was affirmed by the House of Lords in the Havana case. (2) The reason for this rule was that sterling was regarded as a stable currency and a constant unit of value; and that by taking the rate of exchange at the date of the breach, the creditor was being put into as good a position as if the debtor had done his duty and paid the debt on the due date. (3) After sterling ceased to be a stable currency and became subject to fluctuations in the international monetary market a new line of thinking began to emerge, particularly in commercial arbitrations whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account and the money of payment is foreign currency. The court also held that the date of conversion should be the date of payment meaning thereby as Lord Wilberforce pointed out in the Miliangos case (at page 468), the date when the court authorizes enforcement of the judgment in terms of sterling. (7) The Schorsch Meier case was not decided purely upon Article 106 of the Treaty of Rome which by section 2(1) of the European Communities Act, 1972, had been made part of the law of England, but it was also decided upon the general principle that the reasons for the rule in the Havana case having ceased to exist, the court was at liberty to discard the rule itself. Thus, what the Schorsch Meier case decided was directly contrary to the decision of the House of Lords in the Havana case. (8) Both the Jugoslavenska case and the Schorsch Meier case were decided without the other side being represented. From this it does not follow that the judgments delivered in those cases were not folly considered judgments. The leading judgment in each of these two cases was that Lord Denning M.R. who at the date when the Havana case was decided was a member of the House of Lords. In his concurri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in tort and for damages for breach of contract on the ground that it was fairer to give judgment in the currency in which the loss was sustained than in its sterling equivalent at the date of the breach or loss, the principles to be applied in ascertaining the currency of the loss being those of restitutio in integrum and reasonable foreseeability of the plaintiff using a particular foreign currency to purchase the necessary currency to meet the immediate and direct expenditure caused by the defendant's tort or breach of contract. It was further held that in the case of arbitrations it was for the arbitrators to determine in what currency the loss was borne or felt and that the rule that arbitrators may make their award in the currency best suited to achieve an appropriate and just result should be a flexible rule in which regard should be had to the circumstances in which the loss arose, in which the loss was converted into a money sum, and in which it was felt by the plaintiff. (12) So far as practice and procedure is concerned, under the Practice Directions dated December 18, 1975, for the purpose of ascertaining the proper amount of the costs to be endorsed on the writ of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a foreign currency, it would be to direct the defendant to do an act which would be in violation of the Foreign Exchange Regulation Act, 1973. Such a decree can, therefore, only be passed by making the payment in foreign currency subject to the permission of the foreign exchange authorities being granted. If however, the authorities do not grant permission for payment of the judgment debt in foreign currency, it would not be possible for the defendant to make such payment, resulting in the decree becoming infructuous and the plaintiff getting nothing under it. The view of Lawton L.J. in the Schorsch Meier case that the plaintiff should be given judgment in the form in which he asked for it and must be left to extricate himself from the intricacies of the law relating to execution and exchange control does not commend itself to us for it does not appear to us to be conducive to the ends of justice. The court must, therefore, provide for the eventuality of the foreign exchange authorities not granting the requisite permission or even if such permission is given, the defendant not paying the decretal debt, or not wanting to discharge the decree by making payment in foreign currenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above, namely, the date of the commencement of the action or suit, is equally subject to the same criticism. This date was rejected in the Miliangos case because, according to Lord Wilberforce (at page 469), it placed "the creditor too severely at the mercy of the debtor's obstructive defences.. or the law's delay" In that case Lord Fraser of Tullybelton pointed out (at page 502) that if the date of the commencement of the action "were to be taken for conversion, a period of a year or more might easily elapse. allowing for appeals, before payment was made." In our country, it is the misfortune of litigants that by reason of ever-increasing volume of litigation, overcrowded court dockets and undermanned courts, suits are often not disposed of for an unconscionably long time and if we take into account the time that would be spent in appeals, further appeals, and revision and review applications which may be filed, the longevity of the litigation is doubled, if not tripled, so that none can with any certainty predict even a probable date for its termination. The selection of the date of the filing of the suit would, therefore, leave the parties in as uncertain and precarious a posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, may prefer a claim to the attached property. Such claim will have to be investigated and determined by the executing court. Even where no claim is preferred the attached property cannot be brought to sale immediately. A proclamation giving the prescribed particulars has to be first made. Even after such proclamation, the property cannot be put up for sale until after the expiry of the period prescribed by O. 21 r. 68 of the Code of Civil Procedure, 1908 (V of 1908), unless it is subject to speedy and natural decay or when the expense of keeping it in custody is likely to exceed its value. Even after the sale has taken place the judgment-debtor may further hold up the receipt of the sale proceeds by the decree-holder by raising objection to the conduct of the sale. Even otherwise, at times, a fresh auction sale may have to be held if the auction purchaser commits default in paying the balance of the purchase price. A considerable time would thus elapse between the date when the court orders execution to issue and the date of the receipt of the sale proceeds by the decree-holder. This passage of time would as much expose the decree-holder to the hazards of fluctuations in the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to be entered requires the defendant to pay the sterling equivalent of the foreign currency sum adjudged at the time of payment. This would be the most logical date and one which does justice to a plaintiff who has come to court to recover a sum of money payable to him in a foreign currency. If the principle to be applied is that the plaintiff should be put in the same position in which he would have been had the defendant discharged his obligation on the due date, then that principle is best served by the court taking the date of payment as the date of conversion. In adopting this date we, however, find ourselves faced with three practical and procedural difficulties, namely, payment of court-fees, the pecuniary limit of the jurisdiction of courts and execution. So far as court-fees are concerned, we have a Central Act, namely, the Court-fees Act, 1870 (VII of 1870), which applies, either with or without amendments, to those States and Union Territories which have not repealed and replaced it by their own legislation. The States and Union Territories which have their own legislation on the subject are Andhra Pradesh, Gujarat, Himachal Pradesh, Jammu and Kashmir, Karnataka, Ker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, there can be only one decree. It is, therefore neither permissible in law nor feasible for the plaintiff in a suit in which his claim is for a sum of money in a foreign currency to give an undertaking to make good the deficiency in court-fees when he receives payment. In fact, a part or even the whole of the judgment debt may not be recovered at all. Even in the other types of suits mentioned above, it is not when the ascertained amount is received by the plaintiff that the deficit court-fees are to be paid by him. They are to be paid when the amount due to the plaintiff is ascertained. In the type of suits we are concerned with in these appeals, the plaintiff can at the highest give an undertaking to pay the deficit, if any, in the court-fees if at the time when the judgment is given and the decree passed, the rupee equivalent is more than at the date of the suit by reason of the fluctuation in the rate of exchange, but it would not be permissible for him to give such an undertaking for any date subsequent to the date of the passing of the decree. An additional difficulty would be that it is the court in which a suit is instituted which has to ensure at the time of the institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sterling equivalent of the foreign currency sum adjudged calculated at the rate of exchange prevailing on the date nearest or most nearly preceding the date of the application for execution, and the writ of execution would then issue for such sterling equivalent. So far as the limit of pecuniary jurisdiction of courts is concerned, under section 15 of the Code of Civil Procedure, 1908, every suit is to be instituted in the court of the lowest grade competent to try it. We have in India a large number of courts of various grades with different pecuniary limits of jurisdiction. In money suits, it is the amount claimed in the suit which will determine the particular court in which the suit is to be instituted, This determination cannot be done with reference to a foreign currency. It can only be done with reference to Indian currency. This is an additional reason why thy plaintiff must in his plaint give the rupee equivalent of the foreign currency sum claimed by him in the suit by converting it into Indian rupees at the rate of exchange prevailing at the date of the institution of the suit. The difficulty with respect to execution which would arise if the court were to select the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Zafiro.(1) The most usual method of enforcement of a money judgment in England is by writ of fieri facial commonly called fi.fa. (see Halsbury's Laws of England, 4th ed., vo, 17, para. 462). In certain cases, a writ of execution to enforce a judgment or order cannot issue without leave of the court. It is unnecessary to go into the details of the procedure relating to execution in England for what we have stated above is sufficient to show that what the majority in the Miliangos case meant by the date when the court gives leave to enforce the judgment or the date when the court authorizes enforcement of the judgment was the date when the court gives leave to execute the judgment. Does the fact that the decree sought to be executed is one passed in terms of an award which directs payment of a sum of money in a foreign currency make any difference to the date of conversion to be selected by the court ? According to the Division Bench of the Delhi High Court it does because, relying upon the Jugoslavenska case, it held that in such a case the proper date for conversion of the foreign currency sum awarded would be the date of the award in as much as there was no difference between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of section 36 of the English Act provides for enforcement of foreign awards. That section is in the following terms: "36. Effect of foreign awards.- (1) A foreign awards shall, subject to the provisions of this Part of this Act, be enforceable in England either by action or in the same manner as the award of an arbitrator is enforceable by virtue of section twenty-six of this Act. (2) Any foreign award which would be enforceable under this Part of this Act shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in England, and any references in this Part of this Act to enforcing a foreign award shall be construed as including references to relying on an award." Though section 36 is headed 'Effect of foreign awards', it will be seen that sub-section (1) of that section deals with enforcement of foreign awards while only sub-section (2) deals with the effect of foreign awards. Thus, under section 36 (1) there are two alternative modes provided for enforcing a foreign award in England, namely, (1) by action at law on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slavenska case. Kerr J., from whose judgment the appeal in the Jugoslavenska ease was carried to the Court of Appeal, had before deciding the matter made enquiries of the Central Office of the High Court as to the practice in dealing with applications under section 36(1). Roskill L.J. in his judgment in the Court of Appeal has referred to this and has thus set out (at page 507) the information which Kerr J. had received: "He was told that the practice on applications under that section is that the sum awarded in the foreign currency in question is converted into sterling at the rate prevailing at the date of the award and that, in the absence of any other objection, an order is then made giving leave to enforce the foreign award in the same manner as a judgment for that resulting sterling sum." (The emphasis has been supplied by us.) The award in the Jugoslavenska case was not a foreign award within the meaning of section 35 of the English Act for it was made in England, though the sum awarded there under was expressed in a foreign currency, namely, United States dollars. In English law, an application to enforce an award under section 26(1) is only one of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mean that the judgment or order must have "the same effect", it would follow that if the sum awarded were converted into sterling at the rate of exchange as at the date of the award it would have the same effect as a judgment or order in an action on the award. We may point out that Cairns L.J., however, felt some doubt whether the sum awarded must be converted into sterling before leave to enforce the award was given but he did not dissent because both Lord Denning M.R. and Roskill L.J. considered that it should be so converted. As emphasized by us earlier, in the Jugoslavenska case the date of the award was taken as the date of conversion because in an action on such an award the due date for payment of the debt would be the date of the award. We have seen that in the Miliangos case, though the Jugoslavenska case was not expressly over-ruled none of the Law Lords who had occasion to refer to it were happy with what had been held there; Lord Wilberforce opining that there was no reason why, if desired, the practice should not be adjusted so as to enable conversion to be made at the date when leave to enforce the award in sterling is given; Lord Cross of Chelsea thinking it absu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers referred or any of them for reconsideration of the arbitrator or umpire, and section 23(1) of the English Act, under which the court has power to remove any arbitrator or umpire for misconduct. These sections correspond to sections 16 and 11 our Act, We fail to see what relevance either of these sections had to the question in issue. Before we proceed further to discuss this aspect of the case, it will be convenient to set out section 17 of our Arbitration Act, 1940. That section provides as follows: "17. Judgment in terms of award.- Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award." What seems to have impressed the Division Bench of the Delhi High Court is the fact that in Engl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was not a subject-matter of the reference, was awarded a larger sum which made no reference to the cross-claim, was given leave to enforce the whole award as a judgment on an undertaking given by him to accept the difference between the two sums in satisfaction of the award and the extinction of the cross-claim. Further, in answer to an application for leave under section 26(1) the respondent may set up the defence that the award is a nullity, or is wholly or in part ultra vires, or is bad on the face of it. If, however, his objection to the award is that arbitrator has misconducted himself, or that the award was improperly procured, his proper course would be to move to set the award aside, and, if necessary, to have the application to enforce the award adjourned in the meantime (see Halsbury's Laws of England, 4th ed., vol. 2, para 630). None of these contentions are available to a respondent where an application for a judgment according to the award is made under section 17 of our Arbitration Act, 1940. They can only be raised by way of an application to set aside or remit the award after the award has been filed in court and notice thereof issued to the parties under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, can only be said to be "according to the award" if it directs payment of the rupee equivalent at the rate of exchange prevailing on the date of pronouncing the judgment which date is the same as the date of the passing of the decree. For this purpose, the applicant must satisfy the court, either on affidavit or otherwise, as to the rate of exchange prevailing on the date of the judgment or on the date nearest or most nearly preceding the date of the judgment. Under section 17 of our Arbitration Act, judgment is to be pronounced "according to the award". The marginal note to the section speaks of "judgment in terms of award". Under section 26(1) of the English Act, once leave is given, an award becomes enforceable in the same manner as a judgment or order "to the same effect". The words "to the same effect" were interpreted in the jugoslavenska case not as meaning "in the same terms" but as meaning having "the same effect", that is, as having the same effect as a judgment or order given in an action brought on the award. Granting leave under section 26(1) of the English Act and pronouncing judgment according to the award and passing a decree under section 17 of our Act, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s set aside by the court, is a final adjudication of the rights and liabilities of the parties in respect of the matters referred to arbitration and, therefore, Forasol could not claim to convert the French Franc part of the said award into Indian rupees at the rate of exchange prevailing on the date of the decree but can only do so at the rate of exchange prevailing on the date of the award. We find this submission wholly untenable. Undoubtedly, the said award, not having been set aside or modified by the court, is final and binding on the parties and, in respect of the matters referred to arbitration, Forasol cannot claim any amount from ONGC other than that awarded by the Umpire. Forasol is, however, not making any such claim. It is claiming only the sum in French Francs which it has become entitled to receive from ONGC under the said award. All that Forasol wants is that ONGC should pay to it the sum of FF. 5,89,727.51 due to it under the said award or its rupee equivalent as at the date when the court pronounced judgment according to the said award and passed the decree in terms thereof. This is a very different thing from making a claim de hors the said award. The claim made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld 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 second course open to him and claim in foreign currency the amount due to him. In such a suit, the proper prayer for the plaintiff to make in his plaint would be for a decree that the defendant do pay to him the foreign currency sum claimed in the plaint subject to the permission of the concerned authorities under the Foreign Exchange Regulation Act, 1973, being granted and that in the event of the foreign exchange authorities not granting the requisite permission or the defendant not wanting to make payment in foreign currenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 specified in the decree, appellate decree or final order, as the case may be. These questions, of course, would not arise if pending appeal or other proceedings adopted by the defendant the decree has been executed or the money thereunder received by the plaintiff. Turning now to arbitrations, on principle there can be and should be no difference between an award made by arbitrators or an umpire and a decree of a court. In the type of cases we are concerned with here just as the courts have power to make a decree for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be subject to the permission of the foreign exchange authorities being obtained nor specified the conversion rate to be applied in the eventualities which we have set out above. That, however, does not make any difference because neither party has objected to the said award on this ground. On the contrary, both parties have accepted the said award as binding and conclusive. As mentioned above, this omission on the part of the Umpire could have been corrected by the Delhi High Court when it came to pronounce judgment according to the said award and pass the said decree in terms thereof. The decree passed in terms of the said award, however, does not specify either the rupee equivalent of the amount in French Francs payable to Forasol or the rate of exchange at which the conversion of such amount into Indian rupees should be made. To that extent, the decree passed in terms of the said award by the Delhi High Court was not a proper decree. Both the parties have, however, accepted the said decree and have not challenged it on this ground in any proceedings. In any event, the aforesaid mistake in the said decree was one which could have been got corrected by an application for review or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act, ONGC was to pay the difference to Forasol and if the tax rates became lower, Forasol was to pay the difference to ONGC. This proviso was not to be applicable in respect of the taxes payable by Forasol on the income of its personnel. The learned Single Judge has pointed out in his judgment that the claim in respect of tax differential did not survive in as much as by the said award the amounts paid by ONGC as tax on behalf of Forasol were adjusted and given credit for. ONGC did not challenge this finding in the appeal filed by it in the Delhi High Court. None the less ONGC sought to reagitate this point in its Special Leave Petition. At the hearing of this appeal, learned Counsel for ONGC stated that he was not pressing this point. In the written submission filed on behalf of ONGC after the hearing of both these appeals was concluded, ONGC has, however, once again sought to raise this point. The point not having been urged in the intra-court appeal in the Delhi High Court and also having been given up at the hearing of these appeals before this Court, ONGC cannot be permitted subsequently to agitate this point in the written submissions filed on its behalf. In any event, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
