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 Copy page pinpoint

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: ·

"2.5, 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 •

/ 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.

552 SUPREME COURT REPORTS [1984) 1 s.c.R.

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. ..

560 SUPREME COURT REPORTS (1984) 1 S.C.R.

value of the cruzeiro against the French Francs was half what it had A been when the charterers had paid the cargo receivers. The arbitrators made their award in French Francs, On a special casestated Robert Goff J. held that the award should have been made in cruzeiros as being the currency of tlie loss. On appeal by the charerers the Court of Appeal restored the award of the arbitrators.· • ' B The owners of the Despina R as .also the Swedish shipowners went in appeal to the House of Lords. Both the appeals were dismis- sed. The House 4eld ·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 c principles to\e applied. in 'ascertaining the. currency of the loss were those of restituio in integrum and reasonable foreseeability and, th~refore, where a plaintiff proved that lie conducted his business in a specific currency and it was reasonably foreseeable that he would ·. uhe that currency to purchase the necessary currency to meet the ·D immediate and direct expendit'ure caused by the defe~dant's tort, then judgment. •hould be expressed in the plaintiff's . currency and, accordingly, the Court of Appeal had properly varied the order from a judgment expressed in the currencies of expenditure to the currency of the business conducted on behalf of the· owners of the Eleftbe- rotria, namely; U.S. dollars. The following passage from the opinion of Lord Wilberforce (at pages 696-7)' is instructive :

"I do not think that there can now be any doubt that given the ability of an English court (and of arbi- trators sitting in this country) to giv~ judgment or make an award in a foreign currency, to give a judgment in the c~rrency in which the loss was sustained produces a juster result than one which fixes the plaintiff with a sum in . sterling taken at the date of the breach, or of the loss."

It -was farther held that where the terms of a ~on'tract governed by • G English law· did not exprnssly or by jmrlication show that the parties had intended that.payments arising from a breach of contract were to· be paid in the currency of account or other named currency, the court should give judgment in the currency .that best expressed the party's loss;· that, although the appeal in the second case concerned a : . chartcrparty which expressly stated that certain contrac1ual payments should be made in U.S. dollars, the terms of the charterparty did not • show .that payment for damage arising out of a breach of contract

FORASOL ~. O.N.G. COMMISSION (Madon, J.) 561

was to be made in that currency; that, arising from the owners, breach the charterers ha.d used French Francs to purchase the necessary cru~ A zeiros to settle the receivers' claim and, in those circu)i:istances, the Court of Appeal had correctly affirmed the arbitrators' decision that the cu~rency that best expressed ihe charterers' loss was the .currency of their business, n.amely, Frerich Francs. With respect to the arbitra- . tors jurisdiction to iuake an award· in a fore.ign currency, Lord B Wiliberforce said (at pages 702-3);

"In my opinion a de~ision in what c~rrency the loss was borne or felt can be expressed as equivalent to finding which currency sum appropriately or justly ref!bcts the recoverable ·1oss. This is essentially a matter c for arbitrators to determine. A rule that arbitrators ·may make their award in the curreney best . suited to achieve an appropriate and just result should be a flexible rule in which a~count must be taken of the circumstances in which the loss. arose, in· which the loss was convertea into D a money sum, and in which it. was felt by the plaintiff. In .some cases the '.immediate loss·· currency may be appro· 'priate, in others the .currency ii! which it was borne by · the plaintiff. There will be still others in which the appro- priate currency is the currency of the cont~act. Awards· E of arbitrato.rs besed npon 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'Iaw."

F It will also be useful to refer at this- stage to certai11 Practice Directions(1) given, following upon the Mi/iangos case, witli respect to clain1s and judgments in foreign currency and enforcement of such judgments. The Miliangos case was decided on November 5,i975,and the Practice Directions in question were issued by the Senior Master of the Supreme Court· of Judicature (Queen's Bench Division) on G 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 ill the Chancery Division, and of the Senior Registrar of the Family Divison·. so far as thoy applied to the practice . in that Division. As pointed out in Halsbury's Laws of England,-4th H

(I) [1976) I W.L.R. 83 [1976] I All E.R. 669 .

562 SUPREME COURt REPORTS [1984) I s.c.a.

ed., vol.37, para.12, practice .directions "provide directions as to matters of practic@ and procedure for the assistance and auidance of litigants in .the conduct of their proceedings,arid in the administration of civil justice generally, and, although they lack the force of law they are of enormous value, to the courts, to practitioners and to all . who are invotvd in the civil judicial process". Under the Practice R Directions dated December 18,1975, mentioned above, before a writ of summons i• issued in which the plaintiff makes a claim for a debt or a liquidated demand expressed in a foreign currency, the writ must a be endorsed with certificate signed by or on behalf of the solicitor of the plaintiff .or by the plaintiff, if he> is acting i.n person, certifying • the rate current in London for the purchase of the unit of the foreign .c currency claimed at the clo~e of business on the date next or most · nearly preceding the date of the·~ssue of the writ and stating whether ' at that rate of exchange the debt or liquidated demand claimed in the writ amounts to"£.. or exceeds£ 650 (as the case may be)", This certificate is required for the purpose of asceratining the proper amount of the costs to be endorsed on the writ. The judgment which would be entered in respect 9f such a claim would show that it has been adjudged that the defendant, do pay the" plaintiff the sum in foreigh currency for which tile court h.as · ordered judgment to be entered or its sterling equivalent at the time of payment. Where a defendant desires l<t pay into court a r.um of money in satisfaction of the cfaini"in foreign currency he may do so subject to the require- ments of the Exchange Control Act, 1947. Where,however, ·a plaintiff desires to enforce a judgment expressed in a. foreign currency by the issue of the writ of fieri facias, the praecipe for the· is_sue of the writ must first be endor"sed and signed by or on behalf of the solicitor of the plaintiff or by the plaintiff, if he is acting in person, with a · cetificate certifying the rate.of exchange current in London for the purpose of the unit of the foreign currency in which the judgment is expressed, at the close of the business on the date nearest or most nearly precedini: the date of the issue of the writ and mentioning what the amount in pound sterling at that rate would be. The amount G so certified will then be entered in· the writ of fl.fa. A similar certi- ficate is required where the plaintiff desires to enforce a judgment debt expressed in a _foreign currency by adopting garnishee procee- , dings or other modes of execution.

H The above survey shows the position in English law to be as follows :

FORASOL· v. C.N.G. COMMISSION (Madon, J.) 563

(1) Until recently the rule that was firmly established was · that an English court cquld give judgment only in A English currency and that for the purposes of liti- gation fo 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 prevail- ing on the date when the debt was payable. This B rule was affirmed by the House of Lords in the Havana c.ase.

(2) The reason for this r.ule was that sterlin1 was regar- did as a stable currency and a constant unit of value; and that by taking the rate of exchange at the date c 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.·

"D (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 where foreign currencies were involved, and the ~rbi- , trators in the City of London _started making awards E

- expressed in for~ign currency.

(4) . This new trend found judicial recognition 1n the Jugoslavenska case in which the Court of Appeal heid that arbitrators in England had jurisdiction to make an award in a foreign currency in a case in which the money payable under a contract is payable in a foreign currency. The Court of Appeal further held that section 26, now section. 26(1), of the English Arbitration Act, 1950, should be construed h~ving regard to section 36(1) of that Act, which deals with enforcement of foreign awards, and that. ) the words "to the same effect" in the expression "an award ... may .. be enforced in the same manner as a . judgment or order to the same effect" in section 26(1) did not mean a judgment or order· "in the same terms" H but meant a judgment or order having "the same effect" this would be achieved if the sum awarded were ·.

'564 SUPREME COURT REPORTS [i984] 1 s.c.R. • converted into sterling at the rate of exchange pre· A vailing on the date of the award, and that leave to enforce an award expressed in a fqreign currency should be given by the court provided the app)icant had filed an affidavit showing the rate of exchange as at the d~te of the award and giving the amount of B the award converted into_ sterling.

(5) In the Jugoslavenskq case, the Court of Appeal took the date of the award as the date of conversion by reason of the. interpretation piaced by it upon the c . words "to the same effect" in section 26(1) of the Arbitration Act, 1950, because an award could for the purpose of enforcement have the same effect as a judgment in an action on the a ward only if the ·'date of the award were taken as the date of conver· sion as, by reason of the decision in the Havana case, D' which was then the law, in such an action the date of conversion _wou!d have to be the due date of pay• ment which, the debt being crystallized by the award, would be the date of the award, and the judgment, therefore, in such an action would have tci be given on that basis, ' E

- (6) The development-in law was carried yet one step further in the Schorsch Meier case where in an action for the price of goods, the plaintiff being a member of the European Economic Community, the Court of F · Appeal held. that the court could give judgment to · the creditor in a foreign currency if that "as the currency of the contract, that is to say, if the money of account and the money of payment is foreign currency. The court also held that !he date of. G conversion should be the date of payment meaning · thereby' as Lord Wilberforce pointed .out ih the Mi/tangos case (at page 468), the date when the court . authorizes enforcement of the judgment in terms of ·sterling. ·H (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

FORASOL ii. O.N.G. COMMISSION (Madon. J,) • 565

been made part of the law of England, but it was also decided upon the general principle that the A 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•ontrary to the decision of the House of Lords in the Havana case. B (g) Both the Jugoslavenska case ·and the Schorsch Meler case were decided without the ·other side being represented. From this it does not follow that the judgments delivered in those cases were not fully considered judgments. . The leading. judgment in each of t!Jese two cases wa& 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 con· curring opinion in the. Havana case he had already expressed a tloubt and posed a query· whether the D "breach date" rule should continue to be · applied when sterling had lost the value it once had by reason of the devaluation of the pound.

(9) The question again. fell for consideration by the House of Lords in the Mi/iangos case. In that case, E the House of Lords deparied from the rule iu the · Havana case, namely, "the breach date conversion" rule and recognized that an English court could give judginent in a foreign currency in a case where under a contract the money was to be paid in th~t currency if the proper law of the contract was that of a foreign · country and the money .of account was of that country. So far as the date of conversion· was concerned, all the Law Lords, except Lord. Simon of of Glaisdale, were· of the opinion that-it should be . the date when the court authorizes the enforcement of the judgment in terms of sterling. ) (JO) Though the Jugos/avenska case was not expressly overruled in the Mi/iangos case, in .all the opinions delivered in that case except in the opinion of Lord Prasser of Tullybelton where no reference is mac\e to that case, it was doubted whether in the future the

566 SUPREME COURT REPORTS 1!984J 1 S.C.R. • rule in the Jugoslavenska case should or would hold the field. Lord Wilberforce opined that he. saw 'no reason why; if desired, the practice adopted in that ·case should not .be adjusted so as to enable coveision . --to be made at the date when leave to enforce the· award. in sterling is given. Lord Cross of Chelsea B thought it absurJ that there should be one rule, for arbitrations with respect. to . debts expressed in a . foreign curreby and another rule with , respect to actions on similar debts. Lord Edmund-Davis ·said that in the Jugoslvenska case the ' rate of exchange' . prevailing on the date of the award had tci be adopted I

by the court because of the. provisions. of sections 26 -~ · and 36(1) of the English Arbitration' Act and; that bnt for such provisions the most just r~te would lie that prevailing when the award .was being enforced. 'Even Lord Simon of. Glaisdale in bis dissenting opinion expressed the view that if Parliament were to reconsider the sterling judgment rule an_d the breach date rule, the rule in the Jugoslavenska case would come within the purview _of such .reconsideration. ' E (11) The principle laid down in jhe Millangos case was extended by the House of Lords in the case · of The .~· Despin~ R to actions 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 eq~ivalent at . the F . date of the breach or loss, the principles to _be app- .. . _lied in ascertaining the· currency of the loss being those of restitutio in · integrum and reasonable fore-- seeability 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 t1>rt or breach of contract. It. was furth~r 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 H may make their award in the currency best suited to -

.. ' achieve an appropriate and iust result. should be a • : .. llexjble rule in~which regard should be had to the -· ..

FORASOL v. o.N.G. COMMISSION (Madon, J.) 567

circumstances in which the loss arose, in which tl;te loss was converted into a money sum, and in which .A 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 B the costs to be endorsed on the writ of summons the plaintiff's solicitor• or the plaintiff, if he is acting in person, is to certify the rate of exchange current in London at the close of the business on the date next or most nearly preceding the date of the issue of the writ and to mention the sterling equivalent at the c .rate of the sum in foreign currency claimed in the action. The judgment is to be entered for the sum · in foreign currency adjudged by• the court to be payable by the defendant to the plaintiff or its ster· ling equivalent at the time of payment. None the D less if a judgment is to .be enforced by execution, the application for execution is to state the rate of exchange current in London on the date nearest or most nearly preceding the date when the application is made. E

- We have spent some time in ascertaining the English law on the subject by reason of the absence of any authority of any Indian court on this point and because the learned Single Judge has based his decision on the Mi/iangos c~se while the Division Bench of the Deihl High Court has based its on the Jugoslavenska case. Further, the English decisions referred to by us are of courts of a country from which we have derived our jurisprudence and a large part of our laws and in which the judgments were dilivered by judges held in high repute. Undoubtedly, none of these decisions arc binding upon' this Court but they are authorities of high persuasive value to which we may legitimately. tqrn for assistance. Whether the rule laid down in any of these cases can be applied by our courts must, ) however, be judged in the context of our own law and legal proce- dure and the practical realities of litigation in our country. When a foreigner has to receive a sum of money which should· justly be H > payable to bim in a foreign currency and, because of 'the default of the paying party, seeks to recover its payment through tbe court, the first qu_~stion wllich arises is whe~b,er a qourt in fndia would hav~

568 SUPREME COURT REPORTS (19~4) 1 S.C.R.

jurisdiction to. pass a decree for a sum expressed in a foreign currency. Though on principle there is no reason why a court should not be able to do so, no court can pass a decree directing a .defendant to do an impossible or an illegal act and in view of the provisions of our Foreign Exchange Regulation Act, 1973, and the 1 restrictions containe<l' thereiµ on making payments in a foreign currency, if a decree were to be passed Simp/iciter for a sum expressed )·· in a foreign currency, it would be to direct the defendant to do an act. which would be in violation of th! Foreign Exchage Regulation Act, 1973. Such a decree can, therefore, only be passed by· making the payment fo foreign currency subje.ct to the permisson of the foreign exch;jnge authodties being granted, If however, the autho· - '

c rities do not 'grant permission for payment of the judgment debt in foreign currency, it would not b.e possible for the defendant to ma!Ee snch 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 !Je left to extricate him- self froin the intricacies of the law relating to execution and exchani:e control does not commend itself to us for it does not appear to us to

f be conducive to the ends of justice. The court must, therefore, provjde 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 currency or in indian rupees. This gan only be done by the decree providing in ·the alternative for paymen(of a sum of money in Indian rupees, which will be equivalent to the sum decreed in . foreign currency. It is but just that a man, who is in law entitled to ·receive a sum. &f F money in a foreign currency, should either receive it in such currency or should.receive its equivalent in Indian· rupees. .lt is here that the question of the date which the court should select for con· verting foreign currency' into Indian rupees arises. The court musf select a date which· puts the plaintiff in the same po,sition in which G he would have been had the defendant .discharged his• oblig~tion when he.ought to have done, bearing in mind that· the rate of. ex- change is. not a constant. factor but fluctuates, and very often violently fluctuates, from time to time. With these considerations in niind, we will now examine the feasibility 9f the several dates set H. out by:us· at the beginning of our discussion on tlfis point.

The first,of the five dates listed earlier by us, namely, the date · wh~n the amount becam~ 4uc and l'ayable, does not .have the effect ·

FO)lASOL v. O.N.G. COMMISSION (Madon, J.) ' '· of putting the plaintiff in the same position in which he would have .A· been had the defendant discharged his obligation 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 amount decreed in rupees -representing· only a fraction of what he. was .entitled to receive;- Equally, the possibility of the plainiiff getting more than what he had bargained B for in case the rate of exchange had fluctuated in his favour cannot be.ruled out.. To select, 'as the English courts had done earlier, the date when the amount became due or the "breach date", as the English courts have.termed it, is thus to expose the parties fo the. unforeseeable changes iu the international monetary market. The selection of the "breach date" cannot, therefore, be · said to be just, c fair or equitable because in a case where the rate of exchange bas gone against the plaintiff, the d~fendant escapes by paying a lesser sum than what he was bound to and thus is the gainer by his default while in the converse case where the rate 9f exchange bas gone against the defendant, the. defendant would be subjected to a inuch greater burden than what he should be.

' ..--t. The second of the dates mentioned above, namely, the date of .t.he commencement of the action or suit, is equally subject to (he same criticism. This date was rejected in the Mi/iangos case because, according to Lord Wilberforce (at page 469), it plac~d ''the creditor

- • toD severely at the mercy of the debtor's obstructive defences .. or • the law's !lelay." In that case Lord . Fraser of Tullybelton pointed ·out (at page 50 l) that if the date of the commenceme~t of the action "were to be taken for conversion,.a period of a year.or more might ' easily elapse, allowing tor appeals, be(ore payment was made." In F ·>- • our country, it is th~ misfortune of litigants that· by reason of ever'- increasing volume of litigation, . overcrowded · court dockets and ~ ou11dcrmaniled courts, suits· are often not. disposed of for an uncons- cienably long ti.me and if we take into account ·the time that would · 6e spent in appeals, further apJ)eals, and revision· and review appli- G ·cations which may be filed, the longevity of the litigation is doubled if hot tripled, so that none can with any · certainty predict even ; probable date for its termination. The selection of the date of the filing of the suit would, therefore, leave . the parties in as un~ertain and precarious a position as the selection of the date when th~ amount became payable or the "breach date", H

570 SUPREME COURT REPORTS (1984) 1 S.C R.

We will now consider the feasibility of selecting the third date, namely, the date of the decree. A decree crystallizes the amount payable by the defendant to the plaintiff and it is' the decree which entitles the judgment-creditor to recover the judgment debt through the processes of law. An .objection which can, however, be taken to selecting this date is that the dee.roe of \he trial court is nbt the final decree for there may be appeals or other· proceedings against it 'in superior courts and by the time the matter is finally determined, the rate of exchange prevailing on that date may be nowhere near that which prevailed at the date of the decree of the trial court. To select the date of the decree of the trial court as the conversion date would, therefore, be to adopt as unrealistic a standard as the • breach c date". This difficulty is, however, easily overcome by· selecting the date when the action is finally disposed of, in the sense that the decree becomes final and binding between the parties after all reme- dies against it are exhausted. This earl be achieved by the· court which hears the appeal providing that the date of its decree or other proceeding in which the decree is challenged would be the date for D. conversion of the foreign currency sum into Indian rupees in cases ·where the decree has not· been executed in the meantime. The real ~bjection to selecting this <!ate, hO\~ever, is that 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 exe- E cution applications and objections thereto unless the judgment-debtor

- chooses to· pay up the judgment. debt of his own accord which is generally not the case. In the vast majority of cases a money decree is required to be enforced hy exeGUtion,

F Would the proper date of conversion then be the date when the court orders execution to issue ? This date . appears to have found • .-4,, favonr with all the Law Lords who decided the Mi/iangos case, except Lord Simon ofG!aisdale. We, however, find the selection of this date . equally beset with difficulties. Executiori of a decree is not a simple ll matter. In execution of a money decree, first the judgment-debtor's· G proper~y has to be attached .. Pending attachment a . third party, at times set up by the judgment-debtor; 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 H proclamation giving the prescribed particulars has to be first made. ..C, Even after such proclamation, the property cannot be put up for sale until ,'.lfter the expir~ of the period prescribed by 0. 21 r. 68 of.

FoRASOL v. O.N.G. CO.l!M!S!hON (Madon, i.) 571 the· Code of Civil Procedure, 1908 (Vofl908), unless it is subject to speedy and natural decay or when the expense of keeping it in custody A is likely to exceed its value. Even after the sale has taken place the judgment-debtor may furth~r 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 B . 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-balder to the hazards of • fluctuations in the rate of exchange as selection of any of the three dates we have discussed above. Yet 'another difficulty in selecting.the · c l. date when the court orders execution to issue is that at times the judgment debt is not recovered in full ·when the attached property is sold in execution. This necessitates a second application in execution for attaching other properties of the judgment-debtor and even the sale of these propertirs may not cover the deficit; 1hus ne~ssitating yet another execution application. This would lead to an anomalous position for the court would have to fix the rate of exqhange for the entire decretal debt at the time of granting the first application for execution and.then, if the rate of exchange has varied in the mean- time, to fix a different rate of exchange for the unrealized balance of the decretal amount at the time of granting the second application for execution, and equally so with respect to successive applications for execution. Thus, with respect to portions of the same decretal debt different rates of exchange would come to be fixed at different times.

A further difficulty in selecting the date of granting an exe- F cution application is that execution can only issue for a >um expres- sed in Indian currency. What is being is executed is the decree and the sum for which execution is to issue in a money decree must, therefore, be for the particular sum specified in the decree, that is, the judgment debt. It-cannot be for a sum which would be deter- mined and fixed by the executing court.at the time of granting the execution application, for under o.21 r. 11(2) (g) of the Code of I Civil Procedure, 1908, an application for e~ecntion has to state "the a~ount with interest (if any) due npon the deeree". H -The above difficulties would rule out the 1 taking of the date when the court gl'ants an.application for execution as the date of

. . . . ~ . ~12 SUpREME COURT REPORTS .. [198411. s.c.R. conversion and would make inapplicable to our couris the rule laid down in the Mi/iangos £iise. •

As regards the selection by the court ·of the .date of payment as the proper date of conversion, -that was the date taken in the ~\· . Scliorsch Meier case; but as Lord Wilberforce pointed out. (at· page 468) in the Mi!iangos case, tliis only ineans the date when the. court authorizes enforcement of the'judgment in. terins of sterling. As we have seen, in England, acNrding to the Practice Directions dated December 18, l 975, the form.of'the judgment to be entered requires the defendant to pay the sterling equivalent of the. foreign currency sum adjtttlged at the time of payment. This would be the most c logical date and one which does justice to a pfaintiff 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 ihat .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 princi· pie 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 difficuliies, na,mely, pay- ment of court·fees, the pencuniary limit of the jurisdiction of courts ~nd execution.

E So far as court~fees · are ·concerned, we. have a 'central Act, namely, the Court-fees· Act, 1870 (VII of 1870), ~ich applies, either with or withotit 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 e>n the subject are' Andhra · Pradesh, Gujarat, Himachal Pfadesb, F Jammn and Kashmir, Karn'ataka, Kerala, Maharashtra, Pondicherry, - ' Rajasthan, Tamil Nadu and West Bengal. Under' au Court•fees .... Acts, no plaint can be fil~d in any court without payment of court· fees. The plaintiff, therefore, has to value his claim in the suit and pay the court-fees thereon comput;d in the manner provided in the )I relevant Conrt-fee,s Act. So far as inoney !uits are concerned, the G court-fee·s payable are ad valorem conrt·fees according to the amount claimed which may or may not be subject. to .a ceiling . depending · upon which Court·fees·Act applies. A suit for a sum of money expressed in a foreign currency is also a money suit and the plaintiff H !n snch a snit will have to pay court·fees according to the amount claimed. As, however, a court in India cannot, as we have pointed out above, pass a decree simp/iciter for payl)lent of a sum in a foreign currency in such a suit, the plain ti.ff will have to make an· alternative . ' .

FORASOL ~. o.N.G. COMMissION (Madon; J.) claim in his pJaint for the rupee equivalent of the foreign currency sum claimed. He will, therefore, have to pay court-fees on the amount of the rupee equivalent. Such rupee equivalent as at the date of the institution of the suit can only be at the rate of exchange prevailing on that date. If;therefore, a plaintiff were to make the alternative claim on the basis of the rupee equivalent at the time of payment, the value of the suit for the purposes of court-fees would be incapable of computation for it would not be possible to say what the rate of exchange on that date would be. It may be argued on a • the analogy of suit for" accounts or for partition or for adminis· tration or for win.:\ing up'and accounts of a partnership that the plaintiff can put a tentative valuation in his plaint computed according to the rate of \exchange prevailing on the date ,of° the· c institution of the suit and give an undertaking to pay the deficit court-fees if at the time of payment of the amount. decreed, t11e rate of exchange has fluctuated in his favour so, that the amount-realized in rupee equivalent is more than the amount m~ntioned in the plaint. There is, however, a basic difference between a money suit and a suit" for accounts, a partition suit, an administrati.on suit or a partnership suit. .Jn these types of suits, a preliminary decree is passed to ascer· tain the amount due to the plaintiff and when such amount is ascertained; a final decree for the ascertained sum is passed. In a money, suit, however, there can be only one decree. I( 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 foreig!' 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 j~dgment .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 F 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 a! the highest give an undertaking to pay the deficit; if ariy, in the court-fees if at the time when the judgment is· given and the decree passed, the rup.ee equivalent is more than at the date of G 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· . H tion of the.suit' that the proper court-fees have been paid. The deficit court-fees, theref9re, cannot be calculated and the balanee.

574 SUPREME COURT ruiPOl\TS (1984) 1 s.c.Il

thereof recovered by the executing court. These difficulties would rule out both the date when the court orders execution to issue and the date of payment of the decretal debt. to be taken as the date of conversion. .___,

These difficulties do not arise in England. Under the English \. law, the Lord Chancellor has power, with the consent of al" least three Judges of the Supreme Court of Judicature and the concurrence of the Treasury, to fix fees to be taken in the High Court and the Court of Appeal (see Hillsbur.y's Laws of England, 4th ed., vol. 10, para. 908). In the exercise of this power, Supreme Court Fees Orders have been made from time to time. The order currently in force is c the Supreme Court Fees Order, 1980 (S., I. .1980 No. 821), under which the fee payble in the case of a writ endorsed with a claim for a Hquidated sum ·not exceeding £ 2,000 is_£ 35 and in any other ·case it is £ 40, civil proceedings in England beiug commenced by issuing a writ. Thus, in England, a fixed court-fee is payable, the amount thereof varying dependant only upon whether it is an action for a D liquidated sum not exceeding £ 2,000 or not. In England, therefore, as the court-fees payable are not ad valorem court-fees in an action to recover a sum of money exp~essed in a foreign currency, it _w<>uld be immaterial for the purposes of court-fees whether the plaintiff , claims in the alternative the sterling equivalent of that amount as at "E the date of the judgment or as at the date when the court gives leave to enforce the judgmen\ or as at the date of payment because in any of these cases, the court-fees payable by the plaintiff will not vary except where by reason of the fluctuation in the rate· of exchange the amount adjudged or the amount for which leave to enforce the judg- ment is given or the amqunt paid exceeds £ 2,000 in a case where F less than that bas been claimed in the action. It should be noted that English practice also recqgnizes the difficulty which would be · . encountered in issuing execution for a sum in sterling to be deter- mined at the date of payment or realization and accordingly the Practice Directions dated December 18, 1975, require that where a G plaintiff desires to enforce a judgment, he must mention in the application made for that purpose the sterling equivalent of the foreign currency sum adjudged calculated at the rate ·or exchange prevailing on the date nearest or most nearly preceding the date of \ the application for executron, and the writ of execution would then issue for such sterling_ equivalent.

·So far as the limit of pecuniary jurisdiction of cou_rts is concer- ·- ned, under section 15 of the Code of Civil Procedure, 1908 every ,

FORASOL ~- o.N.G. COMMISSION (Madon, J.) 575 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 can· 'not- be done wilt reference to a foreign currency. It can . only be done with reference to Indian currency. This is an additional reason why the plaintiff must in his plaint give the rupee equivalent of the foreign currency sum claimeo by him in the suit by converting it i,nto Indian rupees at the rate of exchange prevailing at the date of the institution of the suit.

The dijficulty with respect to execution which wou~~rise if the c court were to select the date of payment as the date of conversion is ti\at execution must issue for a· specific sum expressed in Indian currency "due upon the decree." It cannot issue for a sum 'which would become ascertainable only when realized or paid as would he the case were execution to issue for the rupee equivalent at the time of payment in rupees of a foreign currency sum. Further, as pointed our earlier, execution can issue only with respect to the amount due upon· the decree.

For the above reasons, it is not possible for•us to accept the date of payment ot realization of the decretal debt as the proper date for the rate of <;onversion.

' This then leaves us with.only there dates from which tci make our selection, namely, the date when the amount became payable, 0

the date of the filing of the suit and the date of the judgment, that F . A.. is, the date of passing the decree. It would be fairer to both the parties for the court to take the latest of these dates, namely, the date of passing the decree, that is, the date of the judgmept.

·The learned Single Judge of the Delhi High Court also reached G the same conclusion. He,. however, did so relying upon the Mili(}Tlgos case under an erroneous belief that when in. that case it was held that the proper date should be the date when the judgment • becomes enforceable what was meant was the date when the judg- ment was given, that is, when the decree was passed. The learned H Single Judge was in error in so reading the judgment of the House of Lords. when the majority in the Miliangos case spoke of the date when the court gives leave to enforce the judgment what they were

576 SUPREME COURT REPoRTS !1984) 1s.c.R.. ·•referring to was not the date of the judgment' but the date on A which the court gives leave to execut~ tbe judgment. In Halsbury's Laws of England (4th ed., vol: 17, para 401) the word 'execution' . is defined as follow :

"The word 'execution' in its widesi sense ;'lg~ifies the · B enforcement of or giving effect to the judgments or orders of.courts of justice. In a narrower sense, it .means the enforcement of those judgments or orders ·by a puh/iC' efficer under. the writs of fieri facias, ·possession, delivery, sequestration, fieri facias de bonis ecclesiasticis, etc." (The emphasis has been SUJ!lied by us.) c Thl~definition als~·appeared in the Third Edition ofHalsbury's Laws of England and was cited with app~oval by Hewson J. in The Zafiro, John Carl/on & Co. Ltd v.' Owners of S.S. Zafiro.( 1) The most.usual method' of enforcement of a money judgment in England is by writ ofjierifacias, commonly ealledji.fa. (see Halsbury's Laws of ' D England, 4th ed., v.o', 11; 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 Mi/iangos case meant ~· E ·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 jud~ei:it.

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 Jugosla•enska 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 awari! in as much as there was no difference between the relevant provisions of the English Arbitr~tion Act, 1950 (14 Geo 6, c.27), and our Arbitration Act, 1940 (X of 1940), p,articularly section 26( I) of the English . Act and section 17 of our Act.· F9r reasons which we will presently set out, the Division Bench of the. .H . Delhi High . Court erred in reaching . this conclusion .. - (I) L.R: (1960) p. I at 14=[1959! 2 All E.R. 5J7"at 544. ·

' Fol\ASOL V. O.N.G. COMMISSION (Madon, J.) . 5_71

VY e have set out earlier the facts of the Jugo,/avenska case and· have extracted the relevant passage from the judgment of Lord A Denning M.R·. To recapitulate, in the .Jugos/avenska case, the plaintiffs had been awarded a sum expressed in uiµted States dollars· ' in an arbitration held in L<mdon and had sought leave of the court . ufi.der section 26, now section 26(1), of the Arbitra.tion Act, 1950, to , enforce that award. rn support of this application, the plaintiffs had ..... B filed an affidavit showing the rate of exchange as _:it the date of the

- award and the equivalent in pound sterling at that· rate of the amount awarded to him and had claimed to enforce the amount awarded on that basis. Two questions, therefore, fell for the court's determination. They were thus put by Roskill L.J. in his judgment in that case (at page 504) : c "The first is whet)1er an arbitrator or umpire sitti11g in.England or Wales can 1'Lwfully make an award in a curtency other then sterling. The second is· whether if such an award can be so lawfully made, it is enforceable . under s. ·26. D

To understand the decision of the Court of Appeal so far as concerns the first question, we must hear in mfod the then prevailing. , state of the law in England and so far as c'on~erns the second question the provisions of the English law relating to enforcement E of awards. At"that time the old rule affirincd by the House of Lords

- in· the Havana. case was the law. Under it an English court could · give judgment only in English currency and in an' action in England to recover a debt expressed in a f.oreign currency, such debt had to be converted in to sterling at the rate of exchange prevailing on the date when the debt was payable. So far as the provisions of English F ) . law relating to enforcement of an award-are concerned, the mode would depend· whether or not it was a foreign award as defined in section 35 of the Arbitration Act, 1950, which definition is mutatis mutandis the same as the definition of "foreign award" given in section 2 of our Arbitration (Protocol. and Convention). Act, 1937 G (VI of 1937). Sub;section (I) of section 36 of the English Act provi- . des for enforcement of foreign awards. That section is in· the ) following terms :

"36. Effect of foreikn awards. - H (I) .A foreign awards shall, ".subject to the provisions of this Part of this Act, ·be enforceable in England

578 SUPREME COURT REPO:ll.tS [1984) 1 S.C.R, .

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, Md 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 referen· ces in this Part of this Act to enforcing a foreign award shall be construed as including references to c relying on an award."

Though section 36 is headed 'Effect of foreign awards', it will be seen that sub-section (1) of that soction deals with enforcement of foreign awards while only sub-section (2) deals with the effect of foreign awards. ·Thus, under section 36 (I) there are two alternative D modes provided for enforcing a foreign award in England, namely, (l) by action at law on the award, and (2) by leave of the court in the same manner as the award of an arbitrator made in England is enforceable under section 26. Since, according tG the law then prevailing, an English court could only give judgment in sterling and required a debt expressed in a foreign currency to be converted _into E English currency at the rate' of exchange prevailing on the date when

F the debt was payable in an action on a foreign award the plaintiff would have to mah his claim in English currency in respect of the sum of money awarded to him in a foreign currency. In such an action the debt in respect of which the plaintiff would be seeking judgment would be the sum of money payable to him under· ihe awar\i which had by virtue of the award become payable to him on - the date of the award. He would, therefore, have to convert the foreign currenc)I sum a warded to him into English currency at the rate of exchage prevailing on the date of the award. . G . Before we deal with the second mode of enforcing a foreign award provided in section 36(1), it will be convenient to reproduce here the provisions of section 26 of the English Arbitration Act which are as follows : • \ H "26. Enforcement of award. - (1) An award on an arbitration agreement may by, leave .. of the High . Court or a j~dge thereof, be enforced in

FORASOL v. o.N.G. COMMISSION (Madon, J.) 579

the same manner as a judgment or order fo the same 'effect, and where leav~ is so given, judgment may be entered in terms of the award.

(a) the amount sought to be recovered does not exceed the current limit on jurisdiction in section 40 of the County Courts Act, 1959, and

(b) a county court so orders, it shall be recoverable (by execution issued from the county court or otherwise) as is payable tinder an order of that court and shall not be enforceable under sub- c section (I) above.

(3) An application to the High Court under-this sectiop shall preclude an application to a county court and an application to a county court under this section D shall preclude an application to the High Court."

Originally section 26 consisted only of. sub-section (!). Sub· section (2) and (3) were inserted in section' 26 and the original section renumbered as sub-section (1) by section 17(2) of the Administration of Justice Act, 1977. The new sub-sections (2) and (3) are imma- E

- terial for our purpose for it was theold section 26, now section 26(1). which formed the basis of the decision in the Jugos/avenska case. Kerr J., from whose judgment the appeal in the Jugos/avenska ease was carried to the Court of Appeal, had before deciding the matter made enquiries of the C_entral Office of the High Court as to F 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 ii.as thus set out (at page 507) the information which Kerr J. had received : "He was told that the practice on applic.ations under G • that section is that the. sum awarded in the foreign ) currency in question ls converted into sterling at the rate prevailing at the date of the award and that, 'in the ab- sence of any other objection, an order is then made giving leave to enforce the ·foreign award in the same H manner as a judgment for that resulting st.er ling sum."

(The emphasis has been supplied by us.)

580 SUPREME COURT REPORTS. [1984) 1 s.c .. R.

The avtard in .the Jugos/avemka case was not a fo1:eign award A ·within the meaning of section,35 of· the English Aci for it was made in England, though the sum awarded there under was expressed in a foreign currency, namely, United States dollars. Jn English law, an application to enforce ap.award under section 26(1) is only· one of the modes of enforcing an award which ·is not a foreign award. B Where such an application is granted, it is not necessary that judg· ment must he entered in' terms· of the award. Lord Denning M.R., in the course of his judgment ii). the Jugos/avenska case; ·pointed out (at page 502) that in most cases it would be unnecessary . to enter ··judgment, for ~nee leave was given, the award could be enforced by the ordinary means of execution, but.it might pe necessary to enter c judgment in order. to issue a bankruptcy notice and the latier words of section 26 enabled judgment to be so entered. Roskil L.J. also · pointed out (at page 507) that under section .26(1) there are two differ.en! steps which must be taken. First, the obtaining of leave to enforce the award in the same manner as a judgment, and secopdly and independently, when ieave is so given, the entering of judgment in th~ terms of the award. I Section 26(1) is .not exhaustive of t4e modes in which an k I award, which is not a foreign award, can be enforced. Such an award · can also be enforced by bringing an action on it in which case, as pointed out earlier, if the sum awarded were expressed in a foreign . cur~ency, the judgment would ·have to be sought.in sterling for which purpose the rate pf exchange would be taken as at the date of ihe award. In the Jugoslavenska case the court held that an arbitrator ·or umpire in England had jurisdiction to make a;award for a sum ·of money expressed in a foreign currency when that particular cur- rency was the appropriate currency in which to express it. The. difficulty which faced the court was the manner of enforch:ig such an award by reason of the decision in the Havana cas.e under which . . an English court could give judgment only in sterling. This difficulty .,;.., was resolved by th~. court by referring to section 36(1) and holding that it would be unreasonable that an award in a foreign currency .made aboard could be enforced by an application under section 26(1) while the same award, if made in England, could not be so enforced. It was.for this.reason that the court interpreted .the words "to the same effect" occurring in section 26(1) as meaning "having the same · H effect" and not as meaning 11 in the s~me terms", because, as Lord Denning M.R. pointed out, if it were to.be so interpreted, there would ·be some difficulty iii applying the section to an award in a foreign currency but if the words were interpreted to mean that. the judgment:

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

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 jud.gment or _,, order in an action ou 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 I' b.ut he did not dissent because both Lord Denning M.R.'and Roskill B 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 Mi/iangos 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 reawn why, if desired, the prac- tice should not be adjusted so as to enable conversion to b.e made at the' date when leave to enforce the award in sterling . is given; Lord Cross of Chelsea thinking it absurd that there should be one rule for arbitrations with respect to foreign currency debts and another with D respect to action• on similar debts; Lord Edmund-Davies expressing his view that no basic distinction could be drawti tor the purposes of a conversion date between j ndgments and awards; and even Lord I Simon of Glaisdale in his dissenting judgment stating his belief that if Parliament were to reconsider the sterling judgment rule and the bre- .E . ach date rule, the Jugaslavensk'a case would come within the purview

' of .such reconsideration. In view of these obseryations and the fact that the H~vana case is no longer the law in view of the ·decision in the Miliangos case, it is highly doubtful whether today ill England· if the matter were c"arried higher, it would be decided in the same way. In view of the Mi/iangos case it cannot be-said today that in a.n action on an award the foreign currency sum directed to be paid under the F

award must be converted at the date of the award when. it was pay- 1Lble. It'would have to be converted ·at the date• .when the court gives foave to enforce the judgment. On principle there can be no difference between an action on an award and a case where instead of filing an action the plaintiff files an application under section 26(1) E for leave to enforce the award. If in an action on the award· the proper date of conversion would be the date when the court gives leave to enforce thejudgment, where an application under section 26(1) is filed the proper date of conversion . . should also be the same for then alone can the award, when leave is given, "be enforced in the . H same manner as a. judgment or order to the same· effect''. .. ;

582 SUPREME COURT REPORTS (1984] I s.c.R.

, _We find that the Division Bench of the Delhi High Court has A not correctly appreciated the ratio of the decision in the Jugoslavenska case nor the reasoning upon which that decision was based. We also "find that the Division Bench of the Delhi High Court has committed an error in equating section 26(1) of the "-\ English Arbitration Act with section 17 of our Arbitration Act. The B ·reason for this error is that the Division Bench of the Delhi High . Court has proceeded upon a wrong assumption that the procedural. scheme oftbe English Arbitration Act is the' same as that of our Arbitrati6n Act. In this connection, the.Division Bench has referred to section 22 ofthe English Act, under which _the court has power from time to t;me to remit the matters referred or any of them for c reconsideration of.the arbitrator or umpire, and section 23(1) of the , English Act, under which the court has. power to remove any arbit- rator or umpire for misconduct. These sections correspond to sections 16 and JI our Act, We fail to see what relevance either of these secti~ns had to the question in issue. Before. we p;oceed further to D .discuss this aspect of the case, ii 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 reconside- ration 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 G High Court is the fact that in England the court is not bound to grant leave to enforce the award but can, when such an application is made, on objection bein_g raised by the respondent, either remit the award or set it aside; and that the same can also be done by a court in India when an award has been filed in court. W.e find that in adopting this line of approach the Divisio!' Bench has overlooked the • basic differences between the English procedure and the procedure under our Act. The provisioqs for. enforcing an award under the

FORASOL v. O.N.G. COMMISSION (Madon, J.) 5g3

English Act and under our Act are different. Under the English Act, if it is sought to enforce an award by making an application under section 2.6(1),.such application has to be made under 0. 73 <. 3 of the Rules of the Supreme Court, 1965, by 11n originating -summons. There is no time-limit provided for taking out such a summons; There is, bow.ever, a time-limit provided for making an application ··~ to the court to remit an award under section 22 . or to set aside an award under section 23(2), under 0. 73 r. 5(1) of the Rules of the Supreme Court, 1965, the period of limitation being 21 days after. the award has been made and published to the parties. An · application for leave to entprce the award under section '26(1) can, however, be made even before the expiry of the time for moving to set aside the award; In such a case, however, it can be resisted upon the ground that a motion to set aside the award to be made. It is 0

opined in Russel on Arbitration, 20th ed. page 375, that in such a case, the party resisting the application would be required to. show, upon affidavit, a suhstanial case for contesting the validity of the award, as well as to swear. to bis intention of doing. so. Under . section 17 of our Act, an application for a judgment ~ccording to the award can only be made after the time for making an application to set aside the award has expiied, or if such application has been made, only after it is refused. Under the English· Act, the court is not bound to grant leave to enforce the award. In doubtful cases, it would ordinarily leave the party to pursue his remedy by filing an E

- action on· the award. The court may also give leave to enforce the award only upon terms. An instance of this is the case of E.D. & F, Man v. Societe Annonyme Triao/itaine Des Usines De Rajfinage De Sucre(') where the applicant, who had throughout admitted that he owed a certain sum .on a cross-claim, which w11s 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 . respon"dent may set up the defence that the award is a nullity, or is wholly or in part ) ;,/tra vires, or is bad on the face of it. If, however, his objection to the ·award is that arbitrator bas misconducted himself, or that the award was improperly procured, his proper course would be to move to set the award aside, and, if necessa'I', to bave the .. (1) · [!97012 Lloyd's L. Rep, 416,

• 584 SUPREME COURT RBPORTS [1984) I s.c.R.

applicati<:>n 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 app)ication 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 rt;mit the award after the award· bas been · B filed it\ ·court and notice thereof issued to the parties under section 14 of the Arbitration Act, 1940. The period of limitation for such an application is .prescribed· by Article 119(11) of the Limitation Act, 1963 (XXXVI of 1963). If the period of limitation expires without any such application being made, the coutt, on application made to it for that purpose, must proceed to ''pronounce judgment according to the award" whereupon a decree has to follow. Section 17 expressly provides that in such a case "the Court ·shalf ... proceed to pronounce judgment according to the award and upon the juagment so pronounced a decree shall follow". The only ground upon which such a decree can be challenged in appeal is that "it is in excess of, or not otherwise in accordance wiih the award". The court before. D which an application for judgment in terms of the award is made,. has, therefore, no discretion in the matter except possibly in a case where the award is on the face of it patently illegal or violative of a provision of the law. Under section 26(1) of the English Act, when leave is given to enforce the award, it is not necessary that judgment should be entered in terms of the award for the.purpose of enforcina the award by execution. Under our Arbitration Act, before.an award can be enforced, a judgment has to be pronounced according to the award, a decree bas. thereupon to follow and it is that decree which ,. alcine can be enforced by an application for execution made under O. 21 r. II of the Code of Civil Procedure, 1908,

It is pertinent tp note that the· judgment, which the court pronounces under section 17, is to be ''according to the award". Where the award·directs a certain sum of 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 a foreign currency and the court while pronouncing judgment provides for its rupee equivalent at the rate of exchange preyailing on the date of the award, the court will not be pronouncing judg111ent "according. to the award" if ill .the meantime the rate of exchange has varied, because at. the \late of the1 Jud~ment the for~ign currency equivalent of th.:\

FORASOL _v. O.N.O. COMMISSION (Madon, J.) 585.

amount in rupees provided in the judgment would be different from the foreign currency sum directed to be paid by the award. The A judgment, therefore, can only be said to be " according to the _award" , _,.if it directs payment of the rupee equivalent at the rate of ·exchange _,,J prevailing on the date of pronouncing the judgment which date is ihe same as the date of the passing of the decre_e. For this purpose, the . '""' applicant must satsify the court; either on affidavit or otherwise, as to the rate of. exchange prevailing on the date of the judgment or on B . the date nearest or most nearly preceding,"the date of the judgment. .

Under section 17 of ·iiur Arbitrati~n Act, judgment is to !Je ·pronounced "according to the awar,P". The marginal note to the section speaks of"judgment in t_erms of award". Under section 26(1} c of the English Act, once leave is given, an award becomes enforceable in the same manner as a judgment or order ".to th_e same effect". The . words "to the same effect" were interpreted in "the jugos/aven.ika case not as meaning "in the same terms" but as meaning having "the same effect", that is; as )laving the same effect as a judgment or order given .D 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, therefore, mean different things and.have different results. A judgment accoring to the award under section 17 our Act will speak only from the date _cif the· E

- ·judgment which will not be the case under section 26(1), for while in the first case what will be enforceable by tl)e processes of law, namely, execution, will be the decree passed in terms of the aw·ard, in the ·second case it will be the award itself, unless the applicant desires to · have judgment entered in te.rm~ of the award which he is not q:quired . .. tci"do as pointed out above.·. · F

On behalf of ONGC reliance was placed upon the decision of · ) this Court in Satish Kumar bnd other_s v. Surinder Kumar and others.(') On .the strength of this decision it was.submitted that an award was not a mere waste paper un\il a decree in terms of the award has been G passed-but an award created rights and liabilities and, therefore; since I. the· award in the instant case provided that a certain sum should be · paid in a foreign cqrrency to F orasol, it spoke from the date when it-• was maae and published and the rate of conversion could, therefore, only be the date of the.said award. ·We are unable to se_e how the above decision in any way bear~ ol,lt"this propo§ition or lends suppor\

(!) [1969] 2 S c;:.R. 244"

SUPUME COURT. RBPOll'rS il984) I S.C.R.

to it In that case, an award, made on a reference to arbitration by the parties without the intervention of the court, was filed in court under section 14 of the Arbitration Act, 1940. In an application made under section 30 to set aside the award, one of the ob;ections taken was that the award required registration as it affected immovable ·"" \. property worth more than Rs. I 00 in value and as the award was not registered, it was not admissible in evidence: This contention was upheld. It was in this context that this Court observed (at page 249) that "an award has some legal force and is not a mere waste paper. If the award in question ·is not a mere waste paper bul' has some legal effect ii plainly purports to or affects property within the c ·meaning of s. 17 (I) {b) of the Registration Act". The question before the Court iri that case was "whether a decree in terms of an unre- gistered award could be passed by the· court in a case where under the Registration Act, 1908 (XVI of 1908), ·the registration of the award was compulsory. This question is very different from the one which we are called upon to decide. D It was also . submitted on behalf of . ONGC that an award ' unless it is set aside by the court, is a final adjudication of the rights

E and liabilities of the partiesin rtispect olthe matters referred to arbi- tration 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 submisson t wholly untenable. Undoubtedly, the said award, not having hee'°n 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 Um- pire. Forasol is, however, not m·aking 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 >i 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 terma thereof. This is a very different thing from making a , claim de hors the said award. The Claim made by Forasol is actually one under the said. award for if the sum awarded to it in French H Francs was not paid or could not be· paid by ONGC, Fora~ol would .be entitled to receive its rupee equivalent. On the decree being passed in terms of the said award the said. award became merged in the • said dceree and the sum of FF. 5,89,727.51 payable to fQra&Ql nQ.Qer

FORASOL v. O.N.O. COMMISSION (Madon, J.) . 587

For the reasons set out above, we are of the opinion that the B i.. ' rule in the jugos/avenska case cannot be applied to this country and the fact that a decree is in terms of an .award for a suin of money expressed in a foreign currency makes no difference to the date to be taken by the court for converting into Indian currency the foreign currency sum directed to·be paid under the award and that such date should also be the date of the decree. · c It would be convenient if we now set out _the practice, which according to us, 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. It is unnecessary for us to categorize the cases in which such a claim can be 'made and decreed. They Jiave been sufficiently indicated in the English decisions referred to by us above. Such ihstances can, however,· never be exhausted because the law cannot afford to be static but must constantly develop and progress as the society to which it . applies, changes its complexion and old ideologies and concepts are discarded and replaced by new: Suffice it to say that the case with which we are concerned was one which fell in this category. In such a suit, the plaintiff, who bas .not received the amount due to him in a foreign currency and, therefore, desires io seek the assistance of the court to recover that amount, has tw_o courses open to him. He can either 'claim the amount due to him in Indian currency or in the in foreign currency which it was payable. If be chooses the fir's! alternative, be .can only sue for that amount as converted into Indian rupees and his prayer in the plaint can only be for a sum in ~ · Indian currency. For this purpose, the plaintiff would have to con- vert 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 ·G the amount became · payable for be was entitled to receive the amount on that date or, at bis option, at the rate of exchange J ' prevailing on the date of the filing of the suit because that is the 'date on which be 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 ' \

. 588 (1984) t ·s.c.R.

of the court will be the amount in. Indian currency clailJled .in. the --1 A suit. The plaintiff may, however, chbose the second course open to · him and clai!Il 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..._ \. B 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 currency even though such permission has been granted or the defendant not making payment in foreign currency or in Indian rupees, whether ·such permission has been :c granted or not, the defendant do ·pay to the plaintiff .the rupee . ·equivalent of the foreign currency sum claimed at the rate of exchange prevailing on the date of the judgment.1 For the purposes ): · of court-fees ~nd jurisdiction the plaintiff should, however, val~e his . · claiin in the suit by converting 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 suc.h raie of exchange is. He should frirther give an'imdertaking in the plaint that he would make good the deficiency in the court-fees, if. any, if at the date of the ., j\ldgment, at the . rate . of exchange then prevailing, the rupee :.,E equivalent of the foreign currency sum decreed is higher than that mentioned iii the ·plaint for the purposes of court-fees 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 prevailing on the date of the judgment or. on the date nearest or- most nearly preceding the date of the judgment. If ·necessary,, after

I F delivering judgment on all other issues, the court may stand ·over the 'rest of the judgment and the passing of the decree and adjourn the·- .matter to enable the plaintiff .to prove such rate of exchange. The . A decree to he passed by the court should be one ·which orders the defendant tq pay to the plaintiff the foreign currency sum adjudged ;, . .·"G by the·court subject to the ·requisite permission of the concerned authorities under the Foreign Exchange Regulation Act, 1973, being gr~nted,and in the event of the Foreign Exchange authorities not granting the requisite permission or the defendant not wanting to . make payment fa foreign currency even though such permission has \. .H been granted or the defendant not·making payment in foreign cur·. relicy or in Indian rupees, whether such permission has been granted :--'i or not, the equivalent of such foreign currency sum ·converted into

PoRASOL v. O.N.G. COMMISSION (Madon, J,) 589 • _Indian rupees at the rate of exchange proved before the court as aforesaid. In the event of the decree being challenged in appeal or other proceedings and such appeal or other proceedings being decided iu whole or iii part in favour of the plaintiff, the appellate court or .... 0

the court hearing the application in the othe.r.pr.oceedings <;hallenging I I 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 appellaljl decree or of its order on such application or on the date.nearest or most nearly preceding t.he da.te of such decree or. order. If such rate of exchange is different from the rate in the decree which has been challe·nged, the court shoul.d make the neces- sary modification with respect to the rate of exchange by its appellate decree or final order. Io: all such cases, execution can only issue· for c 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. · . D Turning now to arbitrations, on principle there can be and should be no difference between an award made by arbitrators or iii 0

umpire and a decree of a court. In !\le typo of cases .we are col)cerned with here just as the court~ have power to make a decree for a sum of money expressed in a foreign currency. subject to the limit;itions and conditions we have .set out above, ~he arbitrators or umpire have t.he power to make an award for a sum. of money expres.sed in a foreign currency. The arbitrators or umpire should, however, provide in the award for the rate of exchange at which the sum awarded in a foreign currency·should be converted in the events mentioned above. This .may be done by the arbitrators or umpfre'taking either the rate of exchange prevailing on the date of the award or the date nearest or most nearly 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 judgment according to the award and passes the decree in terms thereof cir the date nearest or most nearly pr!lceding the date of the judgment as the court may determine. ·If the arbitrators qr umpire omit to provide for the rate of.conversion, this would not by itself be sufficient to invalidate the award. The court may either remit the award under section 16 of the arbitration Act, 1940, for the purpose of fixing the date of con- H version or may do s.o itself taking· the date of conversion as the . date of its judgment or th,e date ·nearest or most nearly preceding it,

'S90 SUPREME COURT llEPORTS (1984) 1 S.C.R.

following the procedure outlined above for the purpose ·of proof of A the rate of exchange prevailing on such date. Ifhowever, the person liaple under such an award desires to make payment of the sum in foreign currency awarded by the arbitrators or umpire without the award being made a rule of the court, he would be at liberty to do so ·.... ,_ after obtaining the requisite permission of the concerned authorities . J B under the Foreign Exchange Regulation Act,-J973: • ·In the case of the said award which had Jed to . these appeals before ns, the party entitled to receive the money - F.Orasol - was a foreign party: Under the said contract, the currency of account was a foreign currency and so was the currency of payment except c foi a portion thereof. Forasol was, therefore, entitled, on paymerit not being made to it by ONGC,_ to receive in French Francs the amounts which became payable to it in that currency. The Umpire was·, therefore, justifieu in providing that the amounts payable under the said award to Forasol in French Francs should be paid in French currency. The Umpire has, however, neither provided that such payment would be subject to the permission of ·the lbreign exchange authorities being obt_ained 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 conciusive. As mentioned above, this omission on the part of the Umpire could. ·have been corrected by-the Delhi High Court when it came to pro- llQunce 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_ th~ rate of exchange at which the conversion of such amount into Indian rupees should be made. To that extent, the decree passe<) in terms of the said award by the Delhi High Court was not a preper decree. Both the parties have, however, accepted the said decree and have not _challenged it on this ground in any proceedings. In a11y event, the aforesaid mis- take in the said decree was one which could have been got corrected by an application for review or by an application under section_ 152 or, in any event under section 151, of the Code of Civil Procedure,

1908. The decree has now become final and binding upon the parties. H Both the parties have accepted.the said decree· and the said decree cannot, therefore, be said to be invalid on the ground of the above omission to ·specify either the rupee equivalent qf the French Franc

FORASOL v.·o.N.G. COMMISSION (Madon, J.) 591

I- , portion of the said award or the rate of exchange at which such French Franc portion -was to be converted ihto its rupee equivalent. • A • For the reasons set out above, we hold that the learned Single .A _j Judge rightly took the date of the decree as the date of conversion. In his order on the. said execution application he has, however, given ~ a direction that ONGC could satisfy the judgment debt by making B payment in French Francs or if they so preferred, by paying the equivalent sum in rupees at the rate of exchange prevailing on the date of the decree. He was in error in not qualifying this direction by making the option given to ONGC to make payment in French Francs subject to the permissiou of the concerned authorities under the Foreign Exchange Regulafion Aci, 1973. To this extent, the c . order passed by t.he learned Single Judge requires to be modified.

Turning now to the appeal filed by ONGC,,it was stated in the Special Leave Petition filed by ONGC that it bad two claims against· Forasol, the first with respect to what was termed as "tax D differential" and the second with respect to interest orl the amounts payable by Forasol to ONGC. Both these claims were negatived

,. by the learned Single Judge. It was expressly stated in paragrah 19 of the Special Leave Petition of ONGC that except for the aforesaid two claims, the judgment and order o( the Division Bench of the Delhi High Court should be affirmed. . ONGC's claim for tax differential was based on Article IV-1.2 ·E

of the said contract under which Forasol was to pay income-tax, ·surcharge on income tax and all otlier taxes which might be assessed and levied by the income-tax authorities in India on the income of F Forasol under the said contract as well as;on the income of Forasol's personnel from the work performed by them under the said contract; Under the proviso to the said Article, if subsequent to the date of the said contract, the tax rates in Ind.ia were changed so as to be higher than what they were at the date of the signing of the said contract, ONG.C was to pay the difference to Forasol and if the tax rates be- _ ·came 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 polnted out in his judgment that the clai111 in respect of tax differential did not survive in as much as by the said. award: the amounts paid by. • ONGC as taA on behalf of Forasol were adjusted· and given credit • for. ONGC did not challenge this finding in the appeal filed by· it

592 SU!'RBME COURT REPORTS (1984) 1 S.c.R. ... in the Delhi High Court. Nc;me 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 an<J also having been given up at the hearing of these appeals before this Court, ONGC cannot be permitted subsequently lo agitate this point in the written submissions filed on its behalf. In any event; in our opinion,· the learned Single Judge was right in rejecting this claim of ONGC.

c So far as ONGC's claim for interest is concerned, it has been negativ;d both by the learned Single Judge and the Division Bench of the Delhi High Court. We find no substance in this claim. The relevant provision of the said award which deals with payment of interest is as follows : D "U:nder the contract there is no right to interest to either party except on French Francs. If . the amount paid by ONGC to the credit of Forasol in reg'!rd to Income Tax and the several items of allowance and · disallowance under.this award are worked out and it is E found that there is an· amount payable to ONGC in .. French · Francs that would carry interest, hut if the amount is in rupees then no interest could be allowed until the date of the award."

F . . The amounts on which interest is claimed by ONGC were payable by Forasol in rupees and not in French Francs. Therefore, by the . express terms of the said award, there is no right in· ONGC to cla.im · any interest on these amounts and this claim for interest was rightly negatived.

G In the result, we allow Ciyil Appeal No. 628 of 1981 filed by • Forasol and set aside the order passed by the Division Bench of the Delhi High Court in the appealfiled by .the Oil and Natural Gas Commission, namely, E.F.A. (O.S.) 5 of 1977 and we restore and confirm the order passed and directions given by the learned Single H Judge of the Delhi High Court in the Execution Application filed by Forasol, namely, Execution No. 17 of[976, with this .modification that.if the Oil and Natural OH Commission wants to pay in French •

. FORMOL v. O.N.G. COMMISSION (Madon, J.) 593

Francs the amount due by it under the said. decree, it will ·be at . liberty to do so after obtaining the reql!isite permission of the A concerned authorities under the Foreign Exchange Regulation Act, 1973.

We dismiss Civil Appeal No. 629 ,of 1981 filed by the Oil and Natural Gas Commission. B ·The Oil and Natural Gas Commission will pay to Forasol the costs of both the Appeals in this Court as also of the Appeal E.F.A. (O.S.) 5 of 1977 in the Delhi High Court. ·

H.s.x: CA No. 628/81 allowed and CA No. 629/81 dismissed. c