FORASOL v. OIL & NATURAL GAS COMMISSION 0

I FORASOL ' .A v.

OIL & NATURAL GAS COMMISSION 0

(AND VICE VE RSA)

B October 25, 1983

[D.P. MADON AND SABYASACH! MUKHARJi, JJ.j • Code of Civil Procedure, 1908-s. 47-Decree passed according to award in foreign curre'ncy without fixing rate Of exchange-In execution pro- c . ceedings court niust decide and select proper date for fix/11g rate of exchange-Criteria for selection of date-Date which puts plaint~ff iii same posiiion in which he would have been had the defendant discharged his obligation when he ought to have done. Proper date is the date of decree.

Arbitration Act, 1940-:-s. 17-Judginent according to the award-When it is. Provisions of s. 17 are different from the provisiOns Of s. 26 (1) of the English D Arbitration Act.

Precedents-English' decisions not binding but have high pursJ.1asiv.r value. -~

Prac/ice & procedure-General practice & procedure . to be followed .by plaintiff while claiming suni in foreign currency, arbitrator while making the E · award and court while passing d~cree-Lai~ down.

F Forasol, it French Company having its principal office in P·aris,' Ffance, entered· into a contract on February 17, 1964 with Oil and Natural Gas Commission (ONGC), a Govern~ent of I~dia undCrtaking, for carrying. out . ·structural drilling in relation to the 'exploration for .oil.in India. Jllrticle IX-3 of the contract provided that the amount payable to Fora$Ol on account of ,-.. operatiOnal fee, standqy fee, and equipment charges shall ·be computed in French Francs and ONGC shall pay so3· of that amount in French Francs, in Paris, France_, and the remaining 20% in Indian rupees using a fixed conversion rate of FF. 1.033=Re. 1.000. Art IX~1.2 provided that certain other charges, e.g., insurance, freight,. etc., incurred by .Forasol were to be reimburzed to Parasol by ONGC in "Indian rupees if the expenditure was initially incurred by G Parasol in Indian rupees, otherwise in French Francs. Article X-2, X-3 ,and X-4 of the contract set out estimates of the payments to be made to Forasol in Frensh Francs, the invoicing 'rules and the rate of payment. Under_ Art. X·3.3, Forasol was to ilidicate in each of its invoices, the amount payable ·to it in French Francs and the amount payable to it in Indian rupees un~r the con· tract. Art. XI provided for paymentS to be made to Forasol in Indian rupees. B The contract which was initially for a period of one year was extended twice and Addendum Nos. 1, 2 & 3 were added to the Contract. During the exten- ded' period of the contract the Indian rupee was devalued in June 1966 and consequently Forasol ID:ade a claim tor conversion of Indian rupees into French •

• FORASOL V. 0.11.0. COMMISSION 527

Francs at a rate higher than the rate specified in Art. IX-3. The disputes and differences which arose between the partie~ were referr.cd to arbitration .. The A Umpfre who made the award directed certain payments to be made in French Francs, but did not specify the rate of exchange at which the French Francs were to be converted into Indian rupees. The award further directed that from November 30~ 1966, the rupee portion should be converted at the higher rate of FF. 1,000 equal to rupees 1,517.80. The award was filed in the Delhi High Court and the High Court passed a decree in terms of the award simpli- citer Without fixing ~ny date for Conversion of the French Francs into Indian · B rupees, with interest at the rate of 6% per annun1 fron1 the date of the decree till the date of payment Neither party raised any objection lo tl1e said ·award or.to the form in which the said decree was passed. Forasol filed an applica· tion in the High Court for. execution of the decree .. ONGC contended that tho enhanced rate of exchange specified in the award was appliCable only with respect to the interest payable to 'Forasol from November 30, 1966 and that to the rest of the payments to be 1nade under the award either in French Francs c or in Indian rupee, the contract rate of exchange was applicable. I\ single Judge of the High Court held that the coniract rate of exchange applied only to the rupee part of' the payn1ent in respect of the 'iten1s specified in Art. IX- 3.1 and that in respect of the other paymeD.ts to be made ·to Forasol in French Francs the rate of exchange prevailing at the date of the decree would apply. In appeal, a Division Bench of the High Court held that the enhanced rate of D exchange specified in th~ award applied only to the interest payable to Forasol and tliat with respect. to the rupee amount the contract rate of exchange applied. It further held that as the award was in French Francs, by reasons of the provisioD.s of the Foreign Exchang~ Regulation Act, 1973, before execu· ting the award the French Francs would have to be converted into· Indian " rupees at the rate of exchange ·prevailing on the date of the said award. Thi~ judgment and order of the Division Bench was. challenged in these cross E appCa1s. The questions which arose for consideration were: (1) Whether the rate of conversion mefltioned in the coritract applied to all the payments to be made under the;: contract whether' in Indian 1upees or in Fren~h Francs, or only to 20 per cent of the amount in French Francs, payable by ONGC to Porasol in Indian rupees in respect of Forasol's operational fee, standby fee and equipment charges; t2) whether the enhanced rate of exchan~e specified in the award· was applicable to all the payments in Indian rupees under Art. IX-3.1 of the contract to be made by ONGC to Forasol or only to the interest .. 0!1 the amount in French Francs payable to Forasol by, ONGC; and t3) which was.the proper date to be selected for converting into Jndian,rupees the French Francs part of the award in respect of which no rate of exchange ·had been fixied either by the contrac~ or by the award ? Two further. questions which were inextricably Jinked with question No. (3) above were: (1) whether an arbitrator or umpire can make an award in a foreign currency; and (2) whether a court can simplicit~r pass a decree in terrr.s of such an award wit-bout speci· fying the rate of exchange at which the foreign currency amount will have to be converted into Indian rupees. H Allowing the appeal of Forasol and dismissing that of ONGC,

3Copy pinpoint3. In an action to recover an amount pa)'able in a foreign ·currency, five"dates compete for selection by t.he Court-as the proper date for fixing the ~ rate of exchange at which the foreign currency amount has to be coverted into ( E -. . the currency of the country in which the action has been commenced and • ).j~ decided. These dat~s are :

(I) the date when the amount be.came due aod payable;

(2) the date of commencement of the action; ~ F (3) .the date of the decree;

(4) the date when the court ordCrs execution to issue; and

(5) the date when the decretal amount is paid or realized.

In a case where a decree had been passed, by the· court in terms of an G award made. in a foreign currency ·a sixth. date also enters the competition, namely, the date of the award. [548G-549B]

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 t~is B country. The question, however, has formed the subject-matter of decisions - in England. Th~ English decisions are of Courts of a country froo:l whiCh we have derived our jurisprudence and a large part of our laws and in which the · judgments were delivered by judges held in high repute. Undoubtedly, none

FOR~SOL V. O.N.G. COMMISSION

of tbeS"e decisions are binding upon this Court but they are authorities of high pursuasive valu_e to which we may legitimately _turn for assistance.. Whether A the rule laid down in any of· these cases can be applied by our Courts mus~, however, be j_udged in the conteXt of our own Jaws and Jegal procedure and the practical realities of.litigation in our country. [549G; 5680] ._? ' ' Miliangos 'i. George Frank (Textiles) Ltd., L.R. [1976] A.C. 443; Tom- · kinson and Anr. v. First Pennsyl_vania Banking &,Trust Co., L.R. {1961] A.C. B 1007; [1960] 2 Ail E.R. 332; Sub-nom in re United Fat/ways of Hal'ana and Reg/a Warehouses Ltd., L.R. [1960] Ch, 52; [1959] l All E.R. 214; Jugos/a- . venska Oceanska Plovibda v. Castle Investment Co. Inc., ,[1973] 3 All E.R. 498~ . ,Beswick v. Beswick, L.R· [1968] A.C 58; [1967] 2 All E.R. 1197; Dr. Mann, The Legal Aspect of Money, 3rd Edn. [1971], p. 363; Sdorsch Meier G.m.b H. v. Rennin, [1975] I All E.R. 152;· Miliangos v. G~"'ge Frank (Textiles) Ltd., [1975] I All E.R. 1076; Practice Statement (Judical Precedent), (1966) I W.L.R c 1234; ·Owners of M. V. E/eftherolria v. The Owners fJ/ ·M. V. Despina R-The Dispina Rand Services Eu.rope At/antique Sud (Seas) Of Paris V. Stockholms Rederiaktiebolag S~ea of Stockholm, L.R. [1979] A.C: 685; Practice directions, [1976] 1 W.L.R. 83; ·[1976] I All E.R. 669; The Zafiro, John Carl/om & Co. Lid. v. Owner; of S.S. Zafiro, L.R. (1960) p. I at 14; [1959] 2 All~ .R .. 537 at 544; E.D. &. F. Man v. Socfete Annonyme Tripolitiane Das Usines De Raffinage De Sucre, t1970] 2 Llyod's L. Rep. 416 and Russel on Arbitration; 20th edn. page 375, referred to.

4Copy pinpoint4. When a foreigner Pas to receive a sum of money ~hich shpuld j~stIY be payable to him in a foreign currency and because of the default of the paying party, seeks to recoyer its payment through the court, the first question which arises is whether a court in India would have jurisdiction to pass a decree E for a sum' expressed ill a foreign currency. Though on princjple there Is no r~sOn why a court should not be able to do so, nO court can ~ass a decree directing a. defendant to do an impossible or an illegal act and in view Of the ·provisions of our Fo~eign Excl;iange Regulation Act, 1973) ·and the restrictions contained tlierein on making payments in a foreign currency, if a decree were to be passed simpliciter for a sum expressed in a foreign currency, it would be to direct the defendant io do an 'act which Would be in violation of the Foreign Exchan&e Regulation· Act, 1973. Such a decrCe can, therefore, only be passed by making the payment in foreign currency subject to the permission of the foreign exchange authorities beinc: granted. If, however, the authorities do not ' grant permission for payment of the judgment debt in foreigri currency, it would not be pOssible for the defendant to make.such. payment, resulting in the decree becoming irifructuous and the plaintiff getting nothing under it. 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 ihe decree _by making payment 1n foreign currency or in Indian rupees. This can only be done bY t.he decree pfoviding in the alternative for payment of a sum of money in Indian rupees, which will be equivalent to the sum decreed H in foreign currency. It is but just that a man, who is in law entitled to receive a su1n of monCy in a foreign currency, should either receive it in such currency or should receive its equiva~ent in Indian rupees. It is here that. the question ...

'

530 SUPREME COURT REPORTS (1984) i S.C.i\. of the date which the court should select for converting foreig11 currency into Indian rupee~ arise. The court n1ust select a date which puts the plaintiff in ~he same position in which he would have been had the defend.ant ~ischarged his obligation when he ougl\t to have done, bearing in inind that the rate of exchange is not a constant factor but fluctuates, and .very often violently fluc- tuates, from time to time.

B The.date when the amount became due and payable, docs not have the effect of putting the plaintiff in the same positjOn in which he would have been had the.defendant dischafged his obliga~ion when he should have done because between that date and the date when-. the suit is deCreed [the rate of exchange may have fluctuated to the plaintiff's prejudice, resulting in the a:11ounf decreed. in rupees representing only a fraction of what he was entitled to rCceiVe. Equally, the possibility of the plaintiff getting mo;e than ·whai he had bargain~ c ed for in case the rate of exchange. had fluctuated in hia favour cannot be ruled out. To select the date when the a1nount became du; or the "breach date'·', as.tlie English courts have terfiled it, is thus· to expose th<: parties to the unforeseeable changes in the international monetary market. The selection of the "breach date" cannot, therefore, be said to be just. fair or equitable. [563H-569D] D The date of the commencement of the action or suit, is equally subject to the same criticism. The selection of the date of the filin2 of the suit would, therefore, leave the parties in as uncertain and precarious a position as the selection of the date when the amount became payable or the "breach date". [569 E-H] ').. To select the date of the ·decree as the· conversion date would. be to adopt as unrealistic a 'standard as the '•breach date" because a money decree and the payment by the judgment debtor of the judgment debt under it are two vastly different matters Widely separated by successive execution applications and objections thereto unless the judgment d~btor ch.oases to pay up the judgment debt of his own accord which is generally not the case. In the vaE:t majority of cases a rlioney decree is required to be· enforced by execution._ {570 A-E] - The selection of the date when the court orders execution to equally beset with difficulties. [570 G] issu~ is ··" In selecting the date of paymenf as the proper dafe of coriversion there are three practical and procedural diffi~ulties, namely, paymC.nt of court fees, • the pecuniary limit Of the jurisdiction of courts and executiOn. {572 B-E]

This then leaves .tbe court with only three dates from which to make the . seleciion, namely, the date when the amouht became payable, the date of the B filing of the suit and the date of the judgment, that is, the date of passing the decree .. It would be fairer to both the parties for the court to take the la.test of these dates, namely, the date of passing the decree, that is, the date of the judgmen.t. (575 FJ

PORASOL V, O.N.G, COMMISSION . 531

S. Under section 17 of the Arbitration Act, 1949 the judgment which the court pronounces is to be "according to the award''. Where the award A directs a certain sum o_f money to be paid and the cOurt, in a case where it has not modified or corrected the award under section 15, pronounces judgment· for a different _sum, the judgment cannot be said to be "according to the award''. In the same way, where an award directs payment of a sum of money in foreign currency and the court while proriouncing judgment provid~s for it's rupee equivalent at the rate of exchan'ge prevailing on 'the date of the award, the court will not be pro'Douncing judgment "according to the award" if in 8 the meantime the rate of exchange has varied, because at the date of the judgment the foreigti currency equivalent of the amount in rupees provided in the judgment Would be different· from the foreign currency sum directed to be paid by the awafd. The judgment, therefore, can only be said to be "accord- ing to the award" if it directs payment of the rupee equivalent at the rate of c::xchange prevailing on the date of pronoupcing the judgment which date is the same as the date of the passin~ of tho decree. [584G·585B] c

6Copy pinpoint6. The Division Bench pf the High Court has committed an error in equating s. 26 (1) of the English Arbitration Act withs. 17 of our Arbitration Act. The reason for this error is that the Division ·Bench has proceeded upon a wrong '·assumption that the procedural scheme of the English Arbitration Act is the same as that of our Arbitration Act. The provisions for enforcing an award under the English Act and under our Act are different. Grantina ·leave under s. 26 of the English Act and pronouncing judgment according to ·the award and passing a decree under .s. 17'of our Act mean different tbingA and have different results. A judgment according to the award under s .17 of our Act will speak only from the date of the judgment which will not b1 the case under s. 26 (1) of the fnglish Act, for while in the first case what will be enforceable by the processes by law, namely execution, will be the decree passed in terms of the award, in the second case it will be the.award itself, unless the applicant desires to have judgment entered in terms of the award. [585C, 58SEJ

Satish Kumar and Ors. v. Surinder Kum•r and Ors .• (1969) 2 S.C.R. l4.4, distinguished. F

7Copy pinpoint7. The practice, which ought to be followed in suits in which a sum of money expressed in a foreign currency can legitimately be claimed by the plaintiff and decreed by the court is as follqws. Jn such a suit, the ·plaintiff, who has not received the amount due to him in a foreign currency and, there- fore, dosires to seek the assisptnc,e of the court to recover that amount, bas ,G two courses open to him. He can either claim the amount due to him in • Indian currency or in t_be foreign currency in which it was payahle. If he chooses the first altern.ative, he can only sue for that amount as converted into Indian rupees and his prayer in the plaint cart 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 eith~ at-the rate of exch!tnge prevailing on the date when the amount be'Came payable for he was entitled to receive the amount on that date or, at his option, at the rate pf oxchange prevailing on the date of the filing of the suit be~ause that is th~

·'.

532 SUPP.Bllfl! COURT P.BPdltTS (1984) l S.C.P.~

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 ~f the jurisdicti(!n of the court v.·ill be the amount in Indian currency clain1ed in the suit. The plaintiff may, hov.-ever, choose the... second course open to him and claim in foreign CUt'rency the .. . ·?mount due tOhim. In such a suit; the proper prayer for the plaintiff t6 make . ' in his plaint would be for a decree thaf t11e defendant do pay to him· the foreign ·currency sum claimed in the plaint subject to the p1;:rmission. of the concerned authorities under the Foreign Exchange Regulation Act, 1973, being granted and t'hat in the event of the forefgn exchange authorities not granting. the

, ·re'quisite permission or the defendant not wanting to make payn1ent in foreign currency even though such permission has been granted or the dffendant not making payment in foreign currency or. in Jnd_ian rupees, w"f1ctLer ·sach per- rnission'has been gran.ted or not, the defendant do pay to the pla~ntiff the rupee c equivalent of the foreign currency sum claimed at the rate of excbange .prevailing on the date of the judgment. For the purposes of court-fees and ju.risdiction the plaintiff should,·however, value his.claim in the suit. by conver- ting the foreign currency sum claimed by him into Indian rupees 'at the rate of exchange prevailing on the date of the filing of. .the· suit or the date nearest or most nearly preceding such date, stating in his plaint what ~uch rate of exchange is. He s_hould further ghe an undertaking in the plaint that he D would make good the deficiency in the court-fees, if any, if at the date of the judgment, at the rate of exchange then prevailing, the rupee equivalent .of the foreign currency sum decreed is higher than that mentioned in the plaint for

E the purposes of court-fe.es and jurisdiction. At the• hearing of such a suit, before passing the decree. the coUrt should call upon the plaintiff to prove the rate of exchange prevaiUng on the date of the j~dgment or on the date nearest or most nearly preceding the date of the judgment. If necessazy, after deliver- ing judgment on all other issues, the court may stand over the rest of the t jlldgment and the passing of the decree and adjourn the matter to enable the plaintiff ·to pfove such rate of exchange. The decree to be passed by the court should be one which orders the defendant to pay to the plaintiff the foreign ~urrency sum adjudged by the court subject. to the requisite permission of the concerned authorities under the Foreign Exchange Regulation Act, 1973, <being F granted, and in the event of the Foreian EX:change authorities not granting the requisite permission or the defendant not wanting to make payment in foreign currency even though such· permission has been granted or the defendant not m·aking payment in foreign currency or in Indian rupees, whether such permis· sion 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 cha11enged in appeal or other ·G procf!eding,s and sueh ·appeal or other procee~ings being decided in whole o~ 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 precedi,ng the date of such H decree or ord~r. If such rate of exchange is different from the rate in tbe decree whi~h has been chailenged, the court should make the necessary modi· fication with respect to the .rate of ex.change by its a~pellate decrCe ·or final

FORAS~L \>; o.N.o. COMMISSION S33 order. ln'all such cases, execuiion can only issue for the rupee equivalent specified in the decree, appellate d~cree or final order, ·as the case may be. These questions, of course, would not arise if pending appeal or other procee-

I dings· adopted 1Jy tµe · defendant the decree l1as been executed of the money thereunder received by the plaintiff. [587D-589C]

s.' Just as the courts have. power tO make a decree for a ·sum of money expressed in a foreign curency subject to the limitaions and cOnditlons set out above, the-arbitrators or umpire have the power to make an a~ard for a_ sum of money expressed in a foreign currency. The arbitrators or umpire should, hoWever, provide in the a war~ for the rate of exchange at which tlte sum awarded in a foreign cu,rrency should be converted in the events mentioned above. This may be done by the arbitrators or umpire taking.either the rate of exchange prevailing on the date of the award or the date nearest or most ne~rly preceding the date of the award· or by directing that the rate of exchange at which conversion is to be made would be the date when the court pronounces 0 judgment according to'. the award and passes the decree in terms thereof or the date nearest or most nearly preceding the date of the jndgment as the court' may determine. ·If the arbitrators or umpire omit to p~ovide for the rate of coversion, this would not by itself·be sufficient to invalidate ihe award. The court May either remit the award,undei: section 16 of the.Arbitration Act, 1940, for the purpose of .fixing the ·date ,of convCrsiori or may do so itself taking the date of conversion as the date of its judgment ·or the date nearest or inost D nearly preceding it,· following the procedure outlined abOve for· the purpose of proof of the rate of exchange prevailing On-such date. If, howe~ver, the person liable under such an award desires to make payment of the sum in foreign currency awarded by the arbitrators or umpire without the award being 1nade ~ rule of the court, he would be at" liberty to do so· after obtaining the requisite permission of the concerned authorities under the Foreign Exchange RegulatiOn E Act, 1973,

9; In the instant case the party· entitled to recei~~ the money-Forasol-Was · a foreign party. -Under the said contract, the currency .of accouDt was a foreign currency and so was the currency of payment except for a portion thereof. Forasol was, therefore, entitled, on payment not being made to it by ONGC, to receive in French Francs the amounts which became. payable to it in that currency. The Uinpire was, therefore, justified in Providing that the amounts payable under,the said award to Forasol in French Francs should be paid i~ French currency. The Umpire has, how_ever; neither provided tl:~at such pay- ment would be subject to the permission ~of the foreign excha"nge authorities being obtained nor specified. the,,conversion rate to be applied in the· eventu~ 8.Uties set-0ut above. That, however, dees not make any difference becaus~ G 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 High Court when it came to pronounce jlldg'ment 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 H . of the amount in French Francs payable to Forasol or the rate of exchange at wl~.ich the conversion of such, am?unt into Indian rupees should be made. To that pxtent, tho decree pas!!C!I in terms of the said award hr t.he HiJh Court w~s not

534 SUPREME COURT RllPORTS (1984) 1 S,C.R. ... a proper decree. Both the partiCs have, however, accepted the said decree and A have not challenged it on' this ground in any proceedings. Jn any eVent, the aforesaid mistake in the said decree was one which could have been got corrcc· ted by an application for review or by an appltcation under section 152 or;in any event under section 151, of the Code of Civil Pcocedure 1908. The decree has noW become final and binding upon the Parties. Bdth the paities have acCeptcd the said dec~ee and the said deC:ree cannot, therefore, be said to be invalid on the ground of the above omission to specify either the rupees equi· B valcnt of the French Franc portion of the said award or the .rate of exchange at which such French Franc portion was to be ccnverted into its rupee equi- valet;it. For theioe reasons we hold that the learned Sing:.e Judge rightly took the date of the decree as the date of conyersion. [590C-591Bj

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6;!8 & 629 c of 1981.

Appeals by Special Le;tve from the Judgment and Order dated the 21st December, 1979 of the Delhi High .Court in E:F.A. (0.S.) No: 5 of 1977. D Shankar Ghosh, and D.N. Gupta, for the Appellant in CA. 628/81 & for Respondent in CA. No. 629/81.

B. Dutta for the Respondent in CA. 628/81 and for appellants in CA. No. 629/81.

Tlie Judgment of the Court was delivered by

MADON, J. Thesa cross appeali by special leave arise out of execution proceedings adopted by Forasol, a French Company,. having its principal office in Paris, France, against the Oil and , Naiural Gas Commission, a statutory bod'.Y incorporated under the Oil and Natural Gas Commission Act, 1959 (Act XLlll of 1959), hereinafter for the sake of brevity referred to as 'ONGC'.

G On July 30, 1962 the Government or' India invited global tenders for structural drilling for exploration of oil in the Jaisalmer area of the State of Rajasthan. The tender of Forasol was accepted by the Gover~ment of India and in pursuance thereof a contract dated February 17, 1964, headed "Structural' Drilling Contract", was H entered into between Oi'!GC and Forasol. Under the said contract, ONGC engaged Forasol to carry out structural drilling in relation to the exploration for oil in the Jaisalmer area of the ·State of Rajas- \1:\an on the \erms and conditions contained in the said contract.

FORASOL v. O.N.G. COMMISSION (Madon, . J.) . 535 The said contract was fo·r a period of one year commencing from the date of the start of the drilling work. The said contract also gave an option to ONGC to extend the period by one more year. Arti~le IX-3 of the said contract dealt with the currency of payment. It provided as follows :

"IX-3.1. The operational fee, standby fee and B equipment charges payable to FORASOL have been specified in French Francs in Article_IX-1.1.1 to IX-1.I.10 above. The'amount payable to FORASOL on accounl of aforesaid fees and charges shall be computed in French Francs ONGC shall pay 80% of the aforesaid amount in French Francs and the remaining 20% in Indian Rupees G using a fixed conversion°rate of FF. J.033=Re. 1.000." • Under Article IX-3.2 the cosl as well as the insurance, packing, forwarding a.nd clearing charges in respect of the materials provided by Forasol and the freight, insurance, paeking, forwarding and clea- ring charges for transportation from a sea port or air port 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. l!l • Under a Credit Agreement arrived at between the Gqvernment of India and the Goveq1ment of Fra_nce, the Government of France bad agreed to provide credit facilities to a limited extent to .the Government of India for the import of plant, machinery, equipment I 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,. 1<)62, exchanged between the' ., Governments of India and France. Consequently, in respect' of the G 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 conditions of the said • letters exchanged between the two Governments and Forasol _and ONGC had agreed upon the estimates of the payments to be made B to Forasol in ·French_ Francs under the said contract, the invoicing rules and the mode of payment. Articies X-2,tX-3 apd X-4 <_lf the

536. . ' SUPREME COURT REP<iR'rS (1984] l S.C.R. 0

said contract set out such estimates, invoicing ruies and the mode of payment. Under Article X-3.3, Forasol was to indicate in each elf its invoices the amount ·payable to it in French Francs and the amount payable to it in Indian rupees under the said contract. · So. far as the mode of deferred payment of French Francs was ·concer- ned, Article X-4.1.I prqvided for remittance by ONGC in French B Francs immedia\ely following the signing of the said ·contract of a sum of FF 73, 437.49, being the l9/800th part (i.e. 1;25 per cent) of the total estimated amount of Forasol's operatio~al and standby fees and equipment charges, cost of the materials· to be provided by Forasol and transportation charges in respect of Forasol's rig, equip- ment, machinery and tools. Under Article X-4.1.2, subsequent to the above remittance ONGC was to remit to Forasol in French J Francs 15/800th part (i.e. 1.875 per cent) of the total estimated amount in retpect of the said items mentioned above, that is FF J.10;156.23 on each 5th day of Aµgust and February, the first of s11ch payments to 'be made· on A11g11st 5, 1962 and the last on February 5, 1965: · Article X-4.2 provided for payment by ONGC to Forasol of the balance of the amount due to Forasol. ·Under .Article X-~.2. I, on receipt of eech of F<irasol's invoices in respect of operational fees, standby fees and equipment charges accepted by ONGC, Forasol • was to present to ONGC a set of 14 promissory notes payable.to CNEP (Paris) of equal value totalling to 87.5% of the French ·Franc • l!l . Portion of the amount for which each ·of the said invoices had been accepted by ONGC and maturing on the 5th day of August and of February, the first 'such dates being August 5, 1965 and the.last being • February 5, 1972. Within fifteen days of the date of receipt of the said promissory notes, ONGC wall to return the said promissory . notes to Forasol (Paris) duly signed and stamped.

Article X-4.2.2 provided fo~ payment of the said promissory 4 notes. The said Article was as follows :• "" • G "X·4.2.2. ONGO binds itself, irrevocably, to pay in . French Francs the promissory notes given 'by it to Forasol. Forasol shall present the promissory notes to CNEP (Paris) for coilecting 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 dato." ·'

FORASOL v. 0,N.G. MOMMISSION (Mildon, J.) 5~7

Under Article X-4.3 ONGC -'undertook 1:0 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 c.alculation of interest and in§urance charges and for submission, by Forasol every - six months of invoices in respect thereof. Article X·4.3.2, inter a/ia, provided that- · ' B • .. · "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." c 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 ~lay 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 hound itself, "irrevocably, to pay in French Francs the pro· D missory notes. for interest and insurnnce charge given by it to Forasol." AFticle XI provided for payments to he made to Forasol in Indian rupees. Under Article XI. I.]. the rupee payment part of the operational and standby fees, equipment charges and transporta· tion·charges payable to Forasol ·under the said contract was estimated· l!l to be FF 1,495,216 and ONGC was to pay to Forasol as an advance 10 per cent of the s~d amount, namely, FF 149,522, in Indian rupees using a conversion rate of. Ff< 1.033 equal to Rupee 1.000. The balance amount in respect of the aforesaid ·item was to be pajd by ONGC to Forasol in Indian rupees using a conversion rate of FF 1.033 equal to .Rupee I.000 in the manner set out in the other sub- · F .articles of Article XI.

. On account of the hpsti!ities between Pakistan and India which broke out in September 1965 the work under the said contract could not be completed and the operations ~ be carried out there under G had to be suspended. The period of the said contract was thereupon extended by a supplemerltary agreement being Addendum No. 1 ·dated December 6, 1965, by a period of six months with effect from the date on which the drilling operations in the •Jaisahner area were resumed at the expiry of the period of suspension. By another B supplementary agreement being Addendum No~ 2 dated July 30, 1966, the period of the said contract was further extended by a period of five .months from the moment at which an the c~uipment of

p. 538

Forasol then under repair at Jodhpur arrived, after completion of . the repairs at the new drill-site, where ONGC might like to have

- drilling operations -to be started under the .said Addendum No. 2. Article 2.7 of the said Addendum No.2 provided as follows: ·

"2.1: In case Forasol has to refund to ONGC an B amount which cannot be adjusted or has not been adjus- • invoices for the last two months ted against Forasol's of the five months period of this Addendum, . Forasol '- shaUrefund the amount in cash in the same 9urrency in which ONGC had paid it earlier." 0 By another supplementary agreement being Add1:nd11m No. 3 ·dated February 23, 1967, the period of the contract was further extended • till the completion of the drilling of Manhere Tibba Well No. I and · in case ONGC should decide to test the said well till the completfon of such test or till April 18.1967. whichever was eiirlier. Article 2.5 of D .the said Addendum No. 3 Provided as follows :

"2.5, In case Forasol has to .refund to ONGC an amoµnt which cannot be adjusted or has not been adjust· ed against Forasol's invoices for the period of extension c 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 coi;tditions agreed to for such supplementary agreements were to continue to apply until tho termination of the said contract.

• , G The extended period of the said contract expired on April •

13, 1967.

/ Jn June 1966;during the extended period of the said contract, the Indian rupee was devalued, and consequently in the course of H correspondence which took place between the parties Forasol made a claim for conversion of Indian rupees into French Francs ai a rate ltigher than the rate specified in Article IX. 3 of the said contract.

• FORASOL v. o.N.G. COMMISS!ONl(Madon, J.) 539 It may also be mentioned tbat ONGC paid to tbe !ncome-tax authorities towards the income-tax liabilities of Forasol three sums aggregating to Rs. 11, 95, 304 as. specified below :

(1) Rs. I, 25, 304 on September 14, 1967,

. (2) Rs. 4, 70, 000 on February 14, 1968, and 8 . (3) Rs. 6, 00, 000 on March 23, 1968.

During the period of extension covered by the said Addendum· No. 3 and after the expiry of that period disputes and differences arose between the parties. These were referred to arbitration as provided in the said contract. The parties appointed their respective c · arbitrators. The time for making the a ward was extended frol)l time to time with the consent of the parties but asForasol did not consent to any further extension, the disputes were referred for arbitration to Mr. N. Rajagopala Iyyangar, a retired judge of this Court, being tlie Umpire appointed by the.arbitrators. In the arbitration proceedings D Forasol made claims against ONGC and ONGC made counter-claims against Forasol. On March 8, 1972, the Umpire entered upon the ·Reference and on December 21, 1974, the Umpire made his award. To the said award an erratum was annexed by which a particular portion of the said award was deleted and substituted by a fresh portion to which we will revert later. For the present, suffice it to say that by the said Erratum the Umpire awarded tbat from I November 30, 1966 the rupee portion should be converted at the Fate •of FF I, 000 equal to Rs. I, 517. 80 instead of the rate -of exchange of FF 1, 033 equal to Re. I, 000 provided in Article IX. 3. l of the said contract and that this enhanced rate of exchange would· apply to both Forsal and ONGC . • The said award was filed in the Delhi .High Court and on May 7, 1975, a decree in terms thereof was passed by that High Courl with interest at the rate of 6 per cent per annum from the date of the decree till the date of payment of the net decretal amount. It is pertineni to note that neither party raised any objection to the said • award or to the form in which the said decree was passed . • After the said decree was drawn up, Forasol filed in March H ,, 1976 an application.for execution of the said decree being Execution No. 77 of 1976. Under tbe said award certain amounts were' directed by the Umpire to be paid to Forasol by ONGC in French

SllPRliMil COURT RBPoRTS [1~84] 1 s.c.a.. Francs a~d certain amounts in Indian rupees, and the amounts payable by Forasol to ONGC'were to be adjusted and set. off against the amounts payable by ONGC to Forasol. In the said execution application the rupee credft in favour of Forasol was converted into French Francs at' the rate of Rupee I. 5178 equal to FF I. 000 ~·! being the enhanced rate of exchange specified in the said award. ·"-· After <!educting the· amounts payable to ONGC the balancl' payable B 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 anriexure . 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 ~est Of the payments to be made under the said award the rate of exchange mentioned in Article IX-3. !, namely, FF. 1.033 equal to D Rupee 1.000, was applicable and that this!con.tract. rate of exchange applied both to the French Franc part as also the Indian rupee· part of the sai.d contract. ONGC also raised certain other contentions. On the basis of these contentions, it was submitted by ONGC that instead of any amount · being due to Forasol ·a sum oC • E Rs. 6,43,831.44 was due by Forasol to ONGC. The learned Single Judge of the .Delhi High Court who heard the sa.id execution applica- ' j:ion rejected all the contentions of ONGC. He held that the contract rate of exchange applied only to the rupee part of the payment in - respect of the items specified in Article IX-3. I of the. said contract" an\) that in respect of such payments from November 30, 1966,. the F enhanced rate of exchange provided in the said award was to apply but in respect of the other.payments to be made to Forasol}n French ..l., Francs the rate of exchange prevailing at tile date of the decree, namely, FF 1.000 equal to Rs. 1.938 would apply. The learned .>I Single Judge directed that ONGC could satisfy the judgment de6t · G by making payment iri French Francs ot, ff it so preferred, by paying • the equivalent of it in Indian rup,ees at the rate .of exchange prevail, ing at the date of the decree and further ordered that if the decretal airloun.t was not paid within two weeks, .attaehmeni as prayed. for i.... should issue. Against the said judgment and order of the learned B . Single Judge ONGC filed an intra;court appeal being E. F. A. (OS) ~ 5 of 1977. The Diyision Bench of the Delhi. High Court, which • 1 heard the said appeal, upheld the contention of ONGC that . the . • .,._.

FORASOL Ii. O,N.G. CoMMISSION (Madon, J.) $41 ' ,. enhanced rate of etchange specified in the said award applied only to the interest payable to Forasol and that With respect to' the rupee amount due to ONGC.and which was to be adjusted against French. Francs payable to Forasol, the contract rate of exchange applied. It further held that as the said award was in French Francs, by reason of the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), before executing the said award the French Francs B w~uld have to be converted into Indian·rupees at the rate of exchange prevailing on the date of the said award, namely, FF 1.000 equal to Rupee I. 831. · The Division Bench negatived the other contentions raised by ONGC. · It is against this judgment and order of the ' Division Bench of the Delhi High Court that the present cross · . appeals have been filed, • c . So far as Forasol's appeal is concerned, four points were urged • on its behalf before us.

The~e points were : D I. The rate of exchange specified in Article IX-3. 1 of the said contract, namely, .FF 1.033 equal to Re. . .,J.- I.000, was applicable only to 20 per cent of the payment to be made in Indian rupees by ONGC to ·~ Forasol. E •

•

2. The Umpire by the said award fixed the rate of • exchange at FF 1.000 equal to Rs. 1.5178 as from Noveniber 30, 1966, , in respect of such rupee •• pa)ments only' . ·.

?-· • 3. The, su111.•of R,s. 10,19,380.39~ being the balance amount of the sum of Rs. 11,95;304 which remain- . Ji_ ed payable to ONGC by Forasol in respect of.. the ineome-tax paid by ONGC on behalf of Forasol after making adjustments against ·the claim· of Forasol, G 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 H 23, 1968, and as all these payments were made after .November 30, 1966,· and as under the said award the enhanced rate· of ~xchange was directed to a:pply 'to

•

542 SUl>RBMI! COURT llEPOJl.TS (1984) 1 8.C.R.

both parties, the said sum of Rs. JO,i'IJ,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 iri French Francs \ . '\.,_

B was concerned, neither the said contract nor the sajd award provided for conversion of French Francs into Indian rupees and the said decree having been • passed in foreign currency, in case ONGC did not or could not make payment in French Francs, th~ rate of conversion of French Francs, into Indian rupees c could only be at the rate of exchange prevailing at . •· the .date of the said decree, that is, on May 7, 1975, which was FF 1.000 equal to Rs·. 1.938.

ONGC, on the other band, submitted that the said contract provided a fixed r!lte of exchange of FF 1.033 equal to Re. 1.000 for D all amounts payable under the said contract, whether in rupees or in French Francs, and, therefore, that rate alone should be taken as the correct conversion ratio except with respect to interest on the amount in Franch Francs payable to Forasol in respect of which the Umpire had enhanced the rate of exchange to FF 1.000 equal to l!l Rs. 1.5178. In the alternative, it was submitted that the. conversion rate should be the one prevailing at the date of the said aw.ard, that is., on December 21, 1974, namely, FF 1.000 equal to Rs. 1.831.

Thus, there are four different rates of exchange which feature . in this case, namely,. :.... . ' Rate provided in the said contract FF 1.033 ., • = ;;. Rs. 1.000 . ""· Rate fixed by the FF 1.000 Rs. 1.5178

• l,Jmpire

Rate at the date of the FF 1.000 Rs. 1.831 said award namely on December 21, 1974 a Rate at the date of FF 1.000 Rs. 1.938 the decree, namely, on May 7, 1975

FORASOL v. o:N.G. COMMISSION (Madon, J.) 543 i- We shall first examine the said ~ntract to determine whether the rate of conversion mentioned in the said Article IX-3.1 applied o~ly to 20 per cent of the amounts in French Francs payable by ONGC to Forasol in Indian rupees in respect of Forasol's. operational fee, st!l!ld· by fee and equipment charges as contended by Forasol or whether it applied to all payments to be made under tl:ie said contract, whether in rupees or in 'French Francs, as contended by ONGC. In doing so, -a cardinal fact must be borne in.mind, namely, that it was a contract entered into between a foreign party and a Government of India under- taking and that under the said contract the foreign party had agreed to carry out structural drilling in relation to the exploration for oil, discovery of oil being of vital importance to the national interests of India. - From the nature of things, the foreign party. would not c desire payment for the services to be rendered and the equipment to be supplied by it in a currency with which it had no connection and of the continuous 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 Agreeinerit 'entered 0 into between ·the Government of -France and the Government of India the Government of France had agreed that credit should be I ---r given by French suppliers to Indian buyers by accepting payment on .,1 deferred basis for the import of plant, machinery, equipment and materials and execution of certain projects including oil exploration, E 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 SO per cent of these fees (lnd charges as also ·the other ' amounts which were payable to it under the said contract should be paid to it in French.Francs only and should not be made _dependent upon the. stability of the Indian rupee in the international monetary market. To recapitulate, the invoicing rules provided that in each of its invoices Forasol should indicate separately the amount payable to itin French Francs and.the amount payable to it in Indian rupees and that so far as the French. Franc p;;rt was concerned, an initial payment was to be made immediately upon the signing of the said contract and the balance was to be paid by remittances in French Francs. Such remittances were to be made by Forasol presenting •

rS44 · · " SUPIUlMI! COUR.T REPORTS (1984) 1 s.c.a.

to ON6C a set of promissory notes payable in Paris and. under ' 'A. Article X-4 2.2 of the said contract ONGC Irrevocably bound itself to pay in French Francs the promissory notes given by it to Foras'ol, .' Siftlilar provisions were made in the said contract for payment of ; interest and insurance. charges to Forasol. If Forasol were to indicate separately in its invoices the payment to be made to it. in B • French Francs and in Indian rupees and if the payment of such : French Francs was to be· made in Paris in French Francs, the · question of providing fur a rate of exchange in the said contract for converting French Francs into Indian rupee cannot arise. Such . conversion rate eould only.be in respect of the amounts payable. to . Forasol in Indian rupees. It is pertinent to note that under Articie . IX-3.1: tlie amount of fees and charges payable to F,orasi>l were to be . computed in French Francs and thereafte~ 80 per cent thereof was to be paid·in French Francs and the· remaining 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 D in Frel\Ch Francs was covenanted to be converted at a fixed rate ·provided in the said Article IX-3.1. This is made abundantly clear . by the express terms of the said Article IX· 3.1 when it states that "ONGC shall pay 80% of the aforesaid amount in French Francs . and the remaining 20% in Indian Rupees using a fixed conversion rate I '> ofFFJ.033=Re. 1.000;" 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 rupee.s which was to be converted at, the aforesaid rate 'of exchange specified in the said contract. This_ . . interpretation receive.s further support from Article 2.2 of Addendum ~No. 2and Article 2.5 of Addendum No .. 3 extracted above under

"F .. 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 ONG.C that the fixed rate of conversion provided in Article IX:3.1 applied to ali payments to be mad~ under the 'sai·d coi1tra_ct to Forasol. must, therefore, be rejected.

; What next falls to be considered is whether the enhanced rate c;if exchange specified by the Umpire in the said a\vard applied only . to the.amount payable by way of iriteresl to-Forasol as contended by t. ONGC; This contention. was-rejected by the learned Single judge but ···H i. found favour with the· Division Bench of the Delhi High Court. fo is :. necessary to set out some •further.facts in order to decide this point. t Duringthe course or' the hearing before the Umpire, ONGC l!ad •

, . .. FOllASOL '· O.N.G. COMMISSION (Madon, J.) 5~5

filed a'statement showing the adjustment offhe amount of French Francs due to Forasol against the amount of income-tax paid by ONGC. on behalf of ForasoL It was, however, erro.neously assumed by the Umpire, that the s~id statement was an agreed one. After the Umpire had drafted his award he handed over a copy of.ii to the parties in order that they might point out to him any incorrect state- ments or mistakes of a clerical or similar nature so that he could. correct tlie same before the award was made and published. Accord- B ingly, both the parties appeared before the Umpire and agreed that there were certain errors iii the draft award and requested the Umpire to correct these errors before he made and Published his award. The Umpire thereupon corrected the errors jointly pointed out to ·him by appending an Erratum to the said award. In the said Erratum the c Umpire pointed out that the aforesaid statement was not an agreed one ahd he directed that certain portions of the· award should. be deletedand substituted by fresh. paragraphs set out in the said Erraturd. In the said Erratum the Umpire first pointed out -certain errors of calculation and in the mentioning of figures which had been occurred. He then proceeded to state,: D ) .-r "Incidentally it was pointed out that the ·statement .,1 on pages 145-6 and in the penu)timate and last two. para- graphs on page 149 regarding the document filed b~fore me, .as regards the adjustment of FF claims due to. Forasol ll against ,the income-tax'paid by ONGC was not an ,agreed statement,' but a· statement prepared by O.N,G.C. on their own to which Fora.SI had not. consented,. As a result of this, the question of adjnstment of the income-tax paid a'[!ainst FF claims, as set out in the last para on page 149 .and in the first two paragraphs on page 150 would be deleted and in their. place the Aw.ard would state that 'the amounts ofincome-tax paid. by ONGC shall be adjusted against the FF claims due to Forasol on tbe. date when each amount was paid in the manner set out earlier 'in the Award.'

~- I • " "To achieve this purpose the paragraphs·on·pages 149 and 150 beginning withthe words 'In the ca:lculatjon of the interest on the several invoices' and ending ·with 'I Jiave'lllready dealt with the conversion rate. and. there is no need to go into it again' •n page 150. shalt: be deleted .and a new. parag(aph. inierted;. which wllrread as folio.vis:

• 546 SUl>REME cotiRt RllroRTs 11984) 1 s.c.it. .. x x ' x x . x A ' ... as a result the aggregate figure of interest payable to Forasol by O.N.G.C. upto 30·6·1974 would be FF 12,91,290,06. From this a small adjustment hks to be made ... when these are adjusted the amount due for interest by O.N.G.C. to Forasol would be FF 12.88.185.35.' B 'This figure of FF 12,91,290.06 has been calculated on the basis of conversion rate of FF 1.033 to a rupee (or FF 1033 for every Rs.1,000/·)which was the rate of exchange agreed to between thee parties under Article XI.. c 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 consi· derable correspondence in the course of which they have mode ·a claim that after devaluation of the rupee there should be a D change in the rate of exchange, Though there is no speific 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 E Con>erted at FF 1 =Rs. 1.5178 or FF 100= Rs. 1.517.80. Of course this rate of ex.change would ·~pply' 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 .interest would thereafter carry interest at 6% per annum, as stated :.i. in the othe_r port.ion of the award.'' • • G' (The emphasis has been supplied by us.)

Article XI-1.1 of the saill contract referred to in the said , Erratum provided as follow :- _;_ • "Xl·l.1.1 On the basis of the figures arrived at in Articles IX·2.1 and IX-2.2 aiove ancHn accordance with the eondition laid 4own in Article IX-3.I above, the tota\ •

•• • FORASOL v. O.N.G. COMMISSION (Madon, J.) 547

of FORASOL's operational and standby fees, equipment charges and transportation charges payable in Indian Rupees under this contract, is estimated to be FF 1,495, 216, Following signature of this contract, ONGC shall pay to FORASOL, as an advance, 10% of this amount i.e. FF 149,522 in Indian Rupees using a conv~sion rate of FF 1.033 = Rs. 1.000." 8

In order to reach the conclusion which it did, the Division' Bench of the Delhi High Court relied upon that portion of the said Erratum where the Umpire has stated that Forasol has put ·forward befor him a claim for "enhance<j rate of interest'', overlooking the other portions of the said Erratum, particularly the portion empha· c sized by us in the above extract as also the fact that by the said 'Erratum certain portions of the said award were deleted and substi· tuted by fresh paragraphs. On a perusal of the above extract · from the said Erratum, it is obvious that the claim made by Forasol was • not for an enhanced rate of interest but for an enhanced rate· of exchange by reason of the devaluation of the rupee. This is made clear by the rest of the very same s.entence in the said Erratum in ~- -' which this claim made by Forasol was referred to, namely; "and their claim is that this should be Rs. 1.5178.for everJ FF or Rs. 1,5178 for every FF 1,000," If the claim of Forasol was for an eohaqced rate of interest, the claim would have been that interest should be payable to it not at the contract rate of five per cent per ... 'annum but at a higher rate and not that a higher rate of exch8fge should be provid~d. The very next sentence which also we hav~ emphasized clarifies that in the correspondence whfoh took place between the parties, Forasol had made a claim that after devaluation of the rupee there· should be a change in the rate of exchange. , Obviously, this change would be with respect to the rupee payment to be made to Forasol. The very direcion of the Umpire· in this behalf makes it clear that he was not dealing only only with the rate of interest for by the said direction, which too we have emphasized in the above extract, the Umpire awarded that from November 30, G 1966, "Rupee por!ion should be converted at FF 1 = Rs. 1.5178 cir 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 e11change was .with H respect only to the interest payable to l'orasot,

54s ·SUPRBME COURT REPORTS . _ [l 984) 1 s.c.R.

We are fortified in the conclusion we have reached by the fact · . that so far as the adjµstment of claim of ONGC with respect to income-tax paid by it was concernea, 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 substituied it by fresh paragraphs. Under the said. Erratum these amounts were dirkcte.d to be adjusted from -November B 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 c -paragraph of the portion of the said Erratum .extracted above, ·in . addition to an enhanced rate of exchange, , the Umpire has also ·awarded a higher rate o( interest, namely, six per 'cent, on the entire sµm of principa\ and interest from December 22, 1974.

D The Divi~ion Bench of the Delhi High Court was, therefore, in error ·in holding that the enhanced rate of exchange specified in the said award applied only to the amou~t of interest payable · to Forasol. For the reasons stated above we find that this enhanced -rate 'of exchange' applied, to the payments in Indian rupees under -Article IX-3.l of the said cimtract to be made by ONGC to Forasol from-and after November 30,1966.

•

F. • The ·que$tion which now remains to be considerd in Forasol's • ap~al is the date to be selected by the Court for converting into Indian rupees the French Franc part of the said award in respect of which no rate of exchange has been fixed either by the said con- tract or the said award. . - • · :In an action to recover an amount payable in a foreign · currency, five dates compete fot selection by the Court as the ·proper da,te for fixing the rate of exchange· at which the ·foreign currency ·G , amount has to be. converted into the currency of the country in which · the:action has been commenced and, decided.

These dates are :

B (1) the date when the amount become due and payable;

(2) the jate of the com.inencement of the action;

'. •

'FORASOL v. O,N.G, COMMISSION (Madon, J,) ·549

'(3) the date of the decree; •

(4) the date when the court .orders execution to issue; and

(5) · the date when the decretal amount is paid or realized .

In a case where a· decree has been passed ·bY the court in term' • b of an award made in a foreign currency a sixth date also e!1ters the competition, namely, the date of the award. The case before us is one in which a decree in terms of such an award has bsen passed by the court.

The said award.directed certain payments to be made in a c foreign currency, namely, French Francs,. and did not specify the rate of exchange at which the French Francs were· to be converted into Indian rupees and the decree which.was passed by the Delhi High Court was in terms of the said award simp/iciter without fixing any date for· conversion of the French Francs Into Indian rupees. As D mentioned earlier, neither party filed any objection to the said award or to the passing of the said decree - in.the terms in which it was passed. The question whether an arbitrator or umpire can make an award in a foreign currency is, therefore, n.ot directly in issue before us nor the question whether a court can simpliciter pass a decree in. terms of such an award without' specjfying the rate of exchange at which the foreign currency amount wiH 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 decjde and we will, therefore, have to address ourselves to them in due course .. '

The question whiCh one out pf the dat~ 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, 'how- ever, has formed the subject•matter of decisioos in England aod both G the learned Single Judge as also the Division Be11ch. of the Delhi High Court have referred to the decision of the House of Lords ·in Mi/iangos v. George Frank (Textiies) iid.( 1) and other English-case&. .>--c ' They have however, reached differing conclusions, theleamed -Single Judge holding that the conversion of French Francs into Indian B

(!) L.R. (1976] A.C. 443.

550 SUPREME COURT RBPORTS (1984) 1 s.c.R.

rupees should be made at the rate of exchange prevailing on the date of the said decree and the Division Bench holding that such conver- sion should be at the rate of exchange prevailing at the date of the said award. ' . It will be convenient, theretore, to turn now to the English decisions on the point to ascertain whether we can find some 'gujE!ance from them in arriving at our concluson. The judicial view on this point in England has undergone a radical change and it will .... not be out of place to ascertain the earlier view which the courts in England iook and the view which now prevails with them and to take a brief survey of how this change in view came about.

c · In Tomkinson and another v. first Pennsylvania Banking & Trust Co.(1) (better known as the Havana case) ou appeal from the deci- >- 4·

sion of the Court of Appeal, sub-nom In re United Railways of Havana and Reg la Warehouses Ltd.,(') after reviewing the earlier ·authorities, the House of Lords held that an English court cannot ·· give judgment for payment of an amount in foreign currency, and D that for the purposes of litigation in England a debt expressed in a foreign currency must be converted into sterling with reference to the rate of exchange prevailing on the date when the debt was payable. Lord Denning, who was then a member of the House of Lords, delivered a concurring judgment in which he pointed out that the origin of this rule was tbat sterling was for a long time regarded 8 as a stable currency, the constant unit of value by which, in the eye of the law, everything else was measured, and! that so long as sterling was regarded as stable while other currencies fluctuated, justice was best done by taking the rate of exchange ·at the date of the breach; the creditor being entitled to ·be put into as good a position as if the debtor had done his duty and paid the debt on the due date and the - creditor was only truly put into such a pasition if the debt was converted into sterling at that date. At the:same time Lord Denning also posed a question whether the rule was still to be applied when sterling had lost the value which it once had by reason of the deva- luation of the pound. He however, came to the conclusion that G though such a rule was apt to produce an injustice to a foreign creditor who was owed money in the currency of his own country if he chose to sue in English courts instead of his own, he must put up with the consequences. The rule affirmed in the Havana case is 0 known as the 0 breach date rule"; H . (I) L-R. [1961] A-C. 1007 ~ (1960] 2 All B.R" 332, ' (2) L.R. (1960) Cb.52 ~ [1959] I All E.R. 214.

FORASOL v. O,N,G, COMMISSION (Madon, J.) 551 .. The next decision which requires to be noticed is that of the Court of Appeal in Jugoslavenska Oceanska' P/ovibdo v. Castle In- A vestment Co .. Inc.( 1) As this authority was relied upcin 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 exa- B mine what was decided in this case in some detai 1• 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,. 195 1, of England to enforce the award. In support of their application the plaintiffs filed an affidavit c 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 fen. fot determination were whether an award expressed in a curre11cY other than sterling was valid and lawful and, if so, whether it was D enforceable under the said section 26. The Master dismissed the application and the order of dismissal was affirmed by Kerr J. On appeal, t!te court of Appeal held that the award was valid and leave should be granted _to enforce it, On the question whether English arbitrators have jurisd.iction' to make an award for p~yment in a foreign currency, the Courfheld that ii1 a proper case they could do .E so and that in the case before them since the money of account and the money of payment under the charterparty out cif which the • disputes between the parties arose were expressed in Unjted States .. . entitled to make their award in the same dollars the arbitrators were currency. It was further held that leave should be granted to enforce an award expressed in a foreign currency provided the applicant had F filed an affidavit showing the rate of exchange prevailing at the date of the award and giving the amount ·or ihe award converted into sterling. When that case fell to be decided Lord Denning was a member of the Court of Appeal, having accepted appointment as Master of the Rolls. In the course of his judgment in that case, G Lord Denning M.R. said (at pages 501-2): •

"The reason why som.e peopl~ have thought that an award by English arbitrators must be i11 sterling is becaese they have regarded it as equivalent· to a judgment by an H

(1) [1973] 3 All E.R 498.

p. 552

English judge which must be in sterling. ·But there is this difference. When commercial men are in dispute and go to arbitration, they wish to have the dispute resolved. They want a decision one way or the other. Once given, they abide by it, The losing party pays up. There is rarely . · any need to call in the sheriff or his officer to enforce the award. So it is perfectly fair; as between them, for the arbitrator to make his award in the currency which is appropiate to their dealings. But, when a plaintiff goes to a .court of law, it is, as often as not, because the defendant cannot pay or will not pay, The plaintiff wants to get judgment against him and, if need be, levy execution on c his effects. This is so much iri the mind of the courts that • thay have ruled that they will give judgment · only in 'sterling. That is the one currency which is known to the court and to the sheriffs and their officers. I venture to suggest that this 'view of the courts should be open for reccinsideratio.n. If.the money payable under a contract 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 t6 be enforced. I know tha(this is not yet the law. There is high authority against it: see E Re United Railways of Havana and Reg/a Warehouses. 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 Beswick v. Beswick.(') This may point the way to a ralaxation of the old rule and enable the courts, in proper circumstances, to order payment in£o a F foreign curreney, such as is suggested by Dr .. Mann in his book.(')

At any rate, there is no reason why tht rule about judgments of the courts should be extended to awards by G · arbitrators, I think we should hold that arbitrators hav1 • jurisdiction to make an award in a foreign cur;ency whenever , that is the proper currency in which payments under the contract should be made; .

H (1) L.R. 1963 A.C,58; [1967] 2 All E.R. 1197. ·(2) The Legal Aspect of Money, 3rd Edn. (1971), p. 363 . •

.. FORA.SOL v. O.N.G. COMMISSION (Madon, J.) 553

"The· next question is the manner of enforcing 'Such an award. It would, no doubt, be possible to bring an action on the award ~nd seek a judgment from the courts in sterling. ~n that case the rate of exchange would be taken at the date of the award. But another way is to seek the leave of the court under s. 26 of the Arbitration Act 1950 which says: B 'An award on an arbitration agreement may, by leave of the High Court or a judge thereof, be enf"'°ced in the same manner as a judgment or order to the same effect, and where leave is· so given, judgment may be entered in. terms of the a ward. C

"If the words 'to the same effect' are read as meaning 'in the same terms', there would be some diffi- culty in applying this section to an award in a foreign currency, But I do not think they"mean 'in the same terms They only mean that the judgment or· order ·must have D 'the same effect'. If the sum awarded is converted into sterling at the rate of exchnge at the date of .the award, it does have the same effect. The proper course is for the applicant to file an affidavit showing the rate of exchange at the date of the award and giving also the amount of the award converted into sterling. Then leave will be given to

- · enforce payment of that sum,"

(The emphasis has been supplied by us.)

It may be mentioned that the defenants did not appear at any stage of the proceedings and were not represented and there. was no appeal to the House of Lords from this judgment.

,, Wheth.er we should accept the decision in the Jugosliivenska case as iaying down the correct rule to be applied so far as courts in this ·country are concerned is a matter which we will discuss aft&r comple- G ting our survey of English authorities.

The question again arose before the ,Court of Appeal in. Schorsch•Meier G.m.b.H. v. flennin.(1) That w.as not a case of an arbitration but it was an ·action by a German company a~ainst an H

(l) p975) I All E.R. 15<

554 SUPREME COURT REPORTS 11984) 1 S.C.R.

English firm in an English court for the price of goods in German A deutschmarks in which currency the .contract stipulated that payment . of the price should be made. The action was commenced by the plaintiffs in the West London County Court for the sum of DM 3, 756.03 being the amount of the price of goods sold and delivered. Under the contract, the money o: account and the money of payment B were both. German deutschmarks. At the time when the sum had become due the rate of exchange was £ I equal to DM 8.30.At that ,rate the sterling equivalent of DM 3,756.03 was£ 452 sterling. Some 'time later sterlltig was devalued. ·As a result £ 1 sterling was only worth DM 5.85 and consequently the velue of £ 452 had fallen to OM 2,664: If the rule in the Havana case applied the plaintiffs would c have got judgment for £ 452 which would have feant only a sum of )r ,. 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 reeover the full amount. The plaintifs 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 tlie Treaty of Rome which by section2(1) of the Europeon 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. The appeal was allowed. With reference to the English law F -0n the sl!bject, apart from the Treaty of Rome, Lord Denning M.R., the afther referring to the rule in the Havana case, held that the reasons for the rule had ceased to exist and, therefore, the court was at liberty to discard the rule itself on the principle, "cessante ratione legis cessat ipsa lex." He fnrther'said (at pages 156·7) : G "Only last year we refused 'to apply the rul~ to arbitrations. We held that English arbitrators have jurisdictfon to .make their a wards in a foreign currency, when that currency of the contract : see jugos/avenska Oceanska p/ovibda v. Castle Investment Co. Inc. The time has now coine when we should say that when the currency \lf a:;sontract is' a foreign currency·that is -to say, when

FORASOL \>, O.N.Cl. COMMISSION (Madon, J.) 555 the money of account and the money of payment is a foreign. currency-the English courts have power to give judgment in that foreign currency, they can make an order in the form: 'It is adjudged this day that the defendant da pay to the plaintiff' so much in.foreign curreny (being the currency of the contract)'or the sterling equivalent at the time of payment'. If the defendant does not honour ihe judgment, the plaintiff can apply for leave to enforce it. He should file an affidavit showing the rate of" exchange at the date of the, application and give the a;,,ount of the debt converted into sterling at that date. Then leave 'will be given to enforce payment of that sum. c (The emphasis has been supplied by.us.)

So far as the Treaty of Rome was concerned, the Court held that ihe · purpose of the said article 106 was to ensure that the creditor in one member State should receive payment for his goods in his own cur- D ... rency if it was the currency of the .contract without any impediment or restriction by reason of changes in the rate of exchange. Wit~ respect to the form . of the judgment, Lord Denning, with whom Foster J. concurred, held that he would ''adjudge that the debtor do pay to the plaintiff OM .\756.03 or the sterling equivalen·t at the time of payment" meaning thereby, as Lord Wilberforce pointed out in the E Miliangos case (at page 468), the date when the court authorizes enforcement of the judgment in terms of sterling. Lawton L.J., the third member of the court, on the other hand, was of the opinion that the judgment should be in the from in which the plaintiffs bad asked for it, namely, in deutschmarks and the plaintiffs must be left F to extricate themselves from th.e intricacies of the law relating to execution and exchange control. There was no appeal io the House of Lords against 'this judgment of the Court of Appeal.

We now come to. the case of Mi/iangos v. George Frank G (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

S\JPREMll COURT REPORTS (1984] 1 S,C.R.

and alternatively on two bills 9f exchange drawn in· Switzerland by the plaintiff and accepted by the defendants but which had been dishonoured on presentation on their ·respective Uue dates." This alternative claim was for the .amou.nts of the said bills of exchange; namely, Swiss Francs 273, 619.45 and Swiss Francs 27,394 respective- ly, and the cost of protesting the bills and interest. The plaintiff apparently had been advised _about the position in Il'nglish law and had accordingly claimed judgment in sterling as at the breach date. • . The defendants claimed that the plaintiff had committed a breaeh of contract inasmuch as. a part of the yarn dilivered to them was unifit for the purpose and filed a counter-claim for damages. There- after; the plaintiff filed a second suit on anot-her contract in w,hich the· -c claim was ·on the same ,alternative counts. Both the a~tions were consolidated· and set .down for . hearing, but befor they reached· _.\.·. - hearing by their letter dated- November 22, 1974, the defendants aba.ndoned their defence and counter-claim and stated that they would submit to judgment. Four days later, on November 26, 1974, n. the Court of Appeal delivered judgment in the Schorsch M eirer case. Thereupon. the plaintiff amended the statement of claim in the first action and claimed the amount due in ·Swiss Francs as an alternative to the claim in sterling. Bristow J. held .·that the Schorsd1 Meier case so far as it related to countries .which Were not ·members of the·. · Eur~pean Economic Community was obiter and had been decided per incuriam in that only one party had been represented and all the relevant authorities had not been cited. He further. held that the decision in that case was inconsistent with what the House of Lords had held in the Havana case and accordingly ·he gave judgment for the sum claimed in sterling. The pJaintiff went in appeai (Miliangaa v. George FJa~k (Textiles) Ltd.(') The Coun of Appeal held that the Sc/;orsch Meier case was not decided· per incuriam and was binding upon the trial court and gave judgment for ·the plaintiff in Swiss Francs. The English company went in appeal. to the House of Lords. We are not concerned with what was said in that case with . respect to whether the Schorsch Meier case was decided per incuriam G • or not and whether an English court could depart from the rule in the Havana case .. Suffice it to say that the Ho'use of Lords by a majority (Lords Simon of Glaisdale dissenting) held that it was legitimate for the House of the. Lords to depart from the "breach \_ date conversion" rule and recognize that an English court was entit- H led to give judgment for a s'um of money ·expressed in a foreign

• (!) [197511 All E.R. 1076.

FOR~SoL v. O.N.G. COMMISSION (Madon, J.) .. currency in tke caso of obligations of a money character to pay foreign currency under a contract, the proper Jaw of waich was that of a foreign country, and wh~n the money of account was that of · that country or possibly of some cou11try other than the United 1~ Kingdom. The Hou·se of Lords further held that the jnstability • ~ • which had overtaken the pound sterling and otlwr 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 arbi· · trators 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 Pre~ed~nt)( 1 } (under which the House affirmed its power to depart from a previous decision when • it appeared right to do so, recognizing that too rig_id an adherence c • to precedent might lead to injustice in a P.articular case and · unduly restrict tlie· development of the Jaw) sine~ a new and more satis- factory rule could be stated to enable the _courts to' keep step with commercial needs and would not involve undue practical ahd proce- dural difficµlties. D We arc 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 should be made specifically for the foreign currency and to this might be added the alternative "or the sterling equivalent at the date of.. .... " and that as regards the conversion date to be inserted in the claim or in the judgment of the court, though the date· of judgment was a workable date, he would favour the date of payment ·meaning thereby the _date when the _court authori'l.es enforcement of the judgment in terms of sterling, because in some . cases, particularly where there was an appeal, the date of judgment might impose upon the creditor a considerable currency risk, Lord Wilberforce further observed (at page 469) :

In the case of arbitration, there may be a minor discrepancy,_ifthe·practice whieh is apparently adopted (see the Jugoslavenska case (1974) Q.B. 292, 305) remains as it is, but I can see no reason why, if desired, thatpractice

J' should not be adjusted so as to enable conversion to be made as at the date when leave to enforce in sterling is given.u · . H (The emphasis bas been suplied by us.) (1) [19661 I W-L.R. 1234,

• 558 SUPREME COURT REPORTS [1984] 1. s.c.R'.

Lord Cross of Chelsea pointed out (at pages 497·8) that it would be absurd to have one rule with regard to arbitrations on debts expressed ·in ·a foreign currency and .another with regard to actions on similar debts and that in a case where the defendant failed to deliver foreign currency for the payment of which the judgment was given, the date for its conversion into starling should be the date when the plaintiff was given leave to levy execution for a sum expressed in sterling. Lord Edmund-Davies, referring to. the Jugos/avenska case, .'-.. said (at page SOI) that being governed by section 26 and sub-section (I} of section 36 (which deals with enforcement of foreign awards) of the Arbitration Act, 1950, the award of American dollars in that case of necessity had to be converted into sterling at the rate of exchange c prevailing on the date when the_ award was made and that but for that fact, the most just rate would be that prevailing when the award was being enforced, for the plaintiff bad been kent out of his money until then and there was no reason why this latter rate should not be'theone .adopted when judgments expressed in a foreign currency are befog enforced. According.to Lord Edmund-Davies, Miliangos D should have been given judgment rnutatis rnutandis in the. form . approved of by Lord Denning M.R. in Schorsch Meier case, namely, that "it is this day adjudged that the defendant do pay to the plain· tiff 416, 144.20 Swiss francs or the sterling equivalent at the time of payment", which would mean, as pointed out by Lord Wilbeforce E (at page 368), the date when the court authorizes enforcement of the judgment in terms of sterling, Lord Fracer of Tullybelton opined

F (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 'betwein the commencement of an action a period of a· year or more might easily elapse, allowing for appeals, before pay· ment was made and that the date of judgment would be better but - there seemed no reason· why the latest practicable date, namely, the 1 date when the court . authorizes the enforcement or' the judgment should not be taken. Lord Simon of Glaisdale held in his dissen· ting judgment that there was no reason for departing from the rule G .laid down in the Havana case and that this should only he done by Parliament on executive or. expert ad'vice. With reference to the Jugos/avenska case Lord Simon observed (at page 489) :

H "If the sterling judgment rule and the breach date rule were to be reconsidered by a properly qualified body, • no doubt the Jugoslavehska case would come within its purview."

l'ORASOL v. O.N.G. COMMISSION (Madon, J.) 559

The principle lilid down by the House of Lords In the Mi/iangos case was extended by it to include a claim based on damages for A torts and for breaches of contract in its decision in Owners of M. V. Eleftherotria v, The Owners of M.V. Despina R-Thf Despina Rand .Services Europe At/antique Sud (SeasF of Paris v. Stockho/ms Rederiahtiebo/ag Svea of Stockho/m,( 1) better known as The Despina R, ·in two appeals heard one after the other and disposed of by a B common judgment.

The first appeal arose out of a collision between two Greek - ships, the Despina R and the Eleftherolria in which the latter was damaged. The Eleftherotria was owned by a Liberian company which c had its head office in Piraeus. The managing agents had their principal place of business in New York and the bank account used for moneys received and payments made on behalf of the owners was a U.S. dollar account in New York. An agreemenl w.as reached under the terms cif which the ow11ers of the Despina R were to pay to .the owners of the Eleftherotria 85 per cent or the ioss ond damage D suffered as a result of the collision. The expenses .of repair bad been incurred in various currencies. The question whether the damages were to be paid in sterling or some other currency was referred to the Admiralty judge. Brandon J. held that he had ,urisdiction to award damages in a foreign currency, but that 'he w·as bound by authority to award them in the currency of expenditure. The Court of Appeal, E dismissing an appeal by the own.ers of the Despina R and allowing a cross appeal, held that here was jurisdiction to award damages in tort in sterling or in a foreign currency, an.d that, in the circumstances · .of the cas~, the appropriate currency was the plaintiffs' currency rather than the currency of the expenditure. F ,'r The second appeal was in respect of a cargo of onions shipped to Brazil by the French ~barterers of a Swedisb-o wned motor ves~el, the Folias. The c~rgo arrived damaged, and the cargo receivers' claim for damages was settled. by -the charterers in Brazilian cruzeiros which they purchased with French Francs,· their normal business . G currency. The hire under the charter'party was payable in U.S. dollars and the proper law of the contract was English law. In arbitration proceedings the owners admitted their liability to the charterers, but contended that paymem should be made in cruzeiros. By then the H

(I) L.R. (1979] A.C. 685. ..

p. 560