Trammo Ag v. Mmtc Limited

judgment reads as under: "119. The first date, i.e., the date when the amount

became due and payable, was not accepted by the Court for the reason that it cannot be said to be just, fair or equitable because in a case where the rate of exchange has gone against the plaintiff, the defendant 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 of exchange has gone against the defendant, the defendant would be subject to a much greater burden than what he should bear. The Court felt that the same criticism would apply to the second of the dates, namely, the date of the commencement of the action or suit because suits are not often disposed of for an unconscionably long time and if we take into account the time that would be spent in appeals, further appeals, and revision and review applications which may be filed, the longevity of the litigation is doubled, if not tripled, so that none can with any certainty predict even a probable date for its termination. As regards the third date, namely, the date of the decree, the Court observed that 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. Dealing with the objection that the date of the decree of the trial court is not final decree for there may be appeals or other proceedings against it in superior courts and by the time the matter is finally determined, the rate of exchange prevailing on that date may be nowhere near that which prevailed at the date of the decree of the trial court, it was observed that this difficulty is easily overcome by selecting the date when the action is finally disposed of, in the sense that the decree becomes final and binding between the parties after all remedies against it are exhausted. As regards the fourth date, i.e., the date when the court orders execution to issue, it was felt that execution of a decree is not a simple matter because it involves execution of

a money decree and the judgment-debtor's property has to be attached and pending attachment a third party, at times set up by the judgment-debtor, may prefer a claim to the attached property which will have to be investigated and determined by the executing court and even where no claim is preferred the attached property cannot be brought to sale immediately and certain formalities have to be complied with and even after the sale has taken place, the judgment-debtor may further hold up the receipt of the sale proceeds by the decree-holder by raising objection to the conduct of the sale and at times, a fresh auction sale may be have to be held if the auction-purchaser commits default in paying the balance of the purchase price and a considerable time would thus elapse between the date when the court orders execution to issue and the date of the receipt of the sale proceeds by the decree-holder. It was also pointed out that at times the judgment debt is not recovered in full when the attached property is sold in execution and further application for execution may become necessary and this would lead to an anomalous position for the Court would have to fix the rate of exchange, which may be different from each application for execution. A further difficulty that was pointed out by the court was that execution can only issue for a sum expressed in Indian currency and it cannot be for a sum which would be determined and fixed by the executing court at the time of granting an execution application. With regard to the fifth date, namely, the date of payment, the Court felt that there were three practical and procedural difficulties namely, payment of court fees, the pecuniary limits of the jurisdiction of courts and execution. Keeping in view the considerations referred to above, this Court declined to adopt the rule laid down in Miliangos case [1976 AC 443 : (1975) 3 All ER 801] and held that it would be fair to both the parties to take the date of

passing the decree, i.e., the date of judgment. The said date was also held applicable to a case where a decree is made in terms of an award made in a foreign currency."

After observing as above, the Supreme Court noted that the Division Bench in the said case had held that the rate prevailing on the date of the decree passed by the Ld. Single Judge would be the conversion rate. Paragraph 122 reads as under: "122. While passing the decision in terms of U.S. dollars the learned Single Judge has not considered the matter of conversion of US dollars into Indian currency. The Division Bench has, however, adverted to this aspect and applying the law laid down in Forasol case the decree has been passed in terms of US dollars as well as Indian rupees on the basis of the rupee-dollar exchange rate prevailing on the date of the decree passed by the learned Single Judge. The said date was applied for the reason, that according to the Division Bench the letters patent appeal filed by Renusagar was not maintainable."

¶29In the above judgment, the Supreme Court held that the Forasol judgment is not required to be reconsidered. The Court held as under: "The practical and procedural difficulties pointed out by this Court in Forasol case against adopting the date of payment cannot, therefore, be ignored. As at present advised, we are not satisfied that the decision in Forasol case calls for reconsideration. Since this is the only question raised in C.A. No. 379/92 filed by General Electric, the said appeal must fail."

In Renusagar, thus the Division Bench had taken the date of the decree by the Single Judge, in respect of the foreign award, as the date for applying the rate of conversion which was upheld by the Supreme Court.

¶30Russel On Arbitration with respect to the aspect of currency of payment opines as under: "6-101 Currency of payment. Section 48(4) of the Arbitration Act 1996 provides that an award may order payment to be made in any currency. The proper construction of this section was considered by the House of Lords Lesotho Highlands Development Authority v Impreglio SpA where Lord Phillips explained that there are two possible way of interpreting the provision. The first is to treat it as simply conferring a procedural power to make an award in any currency, not thereby affecting the existing substantive law concerning awards in a foreign currency. This was the view favoured by the majority in Lesotho Highlands Development Authority v Impreglio SpA. The alternative approach, favoured by Lord Steyn, was that s.48(4) represented a change in the substantive law, by introducing an unconstrained power to make an award in any currency. This was rejected by the majority on the basis that if those who drafted the Act had intended to give such a broad discretion they would have done so more clearly, but the matter cannot be considered entirely free from doubt. Assuming that the existing principles of English law do not apply to the exercise of discretion under s.48(4) then the tribunal should make the award in the proper currency of the contract under which the dispute arose unless the parties have expressly or impliedly agreed otherwise in writing. The proper currency of the contract is the currency with which payments under the contract have the closest and most real connection or, if there is none, the currency which most truly expresses the claimant's loss. An award in a foreign currency may be enforced in England without the need to convert it to sterling."

¶31In Meenakshi Saxena and Ors. v. ECGC Ltd. and Ors. AIR 2018 SC 2831, the Supreme Court, following Forasol, observed as under: "27. In the light of the ratio laid down by this Court

in determining the relevant date for conversion of currency, the first procedure to be adopted by the court is to decide the same in accordance with terms of the contract, if such a Clause is not available in the agreement then the courts have to determine the best possible date, then this Court went ahead and dealt with the procedure to be adopted. But in the present facts that exercise is not relevant as there is a specific Clause in the agreement i.e. Clause 17 which deals with rate of interest. The Clause clearly says that currency should be converted into rupees at the bank buying rate of exchange at Mumbai on the date of relevant shipment."

¶32Thus, as per the above judgement, the Court has to determine the best possible date, if the clause for conversion is not available in the contract.

¶33What would be the best possible date in the present case? Recently, in Royal Construction Company Pvt. Ltd. v. National Projects Construction, EFA (OS) 19/2017, Decided on 17th December, 2018, a Division Bench of this Court had adopted the doctrine of merger and held as under: "The doctrine of merger would certainly apply in a case of this nature with the award having been challenged first under Section 34 of the 1996 Act before the learned Single Judge, then before the Division Bench, and finally before the Supreme Court by the JD. If, therefore, the date of the Award, which itself is a decree under the 1996 Act, in effect is postponed to the date of it attaining finality, i.e. 24th February 2015, then that should be taken to be the date when the amount becomes payable and that would be considered to be the relevant date for conversion."

In this case, the Ld. Division Bench, after holding that the date of finality should be taken as the date when the amount becomes payable, granted

certificate of appeal to the Supreme Court.

¶34In DLF Universal Limited & Ors. v. Koncar Generators and Motors Limited, (2018) 190 PLR 398, the Punjab & Haryana High Court also held that the rate of conversion applicable in the case of enforcement of a foreign award would be the date when the objections came to be decided finally. Paragraph 17 of the said judgment reads as under: "17. Enforcement of the foreign award is governed by Part 2 of 'the Act'. Section 49 deals with the situation when the foreign award is enforceable and binding. Section 48 which has been extracted above lays down conditions for enforcement of the foreign award. Section 49 provides that where the Court is satisfied that the foreign award is enforceable under this Chapter, the foreign arbitral award shall be deemed to be a decree of that Court. Section 49 clearly spells out that before a foreign award is considered enforceable as a deemed decree of that Court, the Court is required to record a satisfaction that the foreign award is enforceable under this Chapter. Such determination finally comes when objections under Section 48 of 'the Act' are finally decided. In this case objections under Section 48 of 'the Act' came to be decided finally only on 01.07.2014 when the revision petition filed by the petitioner against dismissal of the objection petition under Section 48, was finally dismissed."

¶35Ideally, the arbitral award ought to have prescribed the rate of conversion. The confusion has arisen as the award has failed to provide the rate of conversion.

¶36Though an arbitral award which does not prescribe the rate of conversion can still be valid, the postponement of prescribing the rate of conversion is writ with several anomalies and uncertainties. On the date

when the award is pronounced, neither party is sure of its entitlement or liability. The party which loses or decides to challenge the award, if not asked to deposit the awarded amount, may obtain huge benefits if the foreign exchange rate at the end of the challenge turns out to be in its favour. On the other hand, the party succeeding can be put to severe disadvantage if the conversion rates are not to its benefit. Further, the amount awarded continues to fluctuate till the final appeal/petition is decided and both parties proceed merely on approximations. As the parties are corporate entities, liabilities/ entitlements which are to be reflected in their balance sheets are also unpredictable.

¶37There are various advantages and disadvantages in accepting or rejecting various dates which are suggested by either party for the purposes of deciding the rate of conversion. If there is a decline in the rupee, the same would benefit the succeeding party. If the rupee strengthens, it would benefit the losing party. This coupled with the rates of interest that would have to be applied would leave the awarded amount as extremely nebulous and unpredictable. Such a situation also discourages parties from settling or resolving the disputes and encourages speculative challenges to the award. The variation in the awarded amount could, in some cases run into crores of rupees only based upon the foreign exchange rate. Postponement of the date of conversion could lead to unforeseen consequences, especially in the case of foreign transactions where circumstances such as war, sanctions, devaluation of currency etc. could lead to the award being rendered merely a paper award. Such unpredictability, especially after the passing of the award is wholly avoidable. Thus, in awards where amounts claimed and awarded are in foreign currency, while not specifying the rate of conversion in the

award may not invalidate the award, it is an essential good practice for awards to specify the rate of conversion applicable, unless there are extenuating circumstances. Both the parties would then be aware of their respective liabilities or entitlements and the same would be crystalized on that date. A party which choses to challenge the award would be aware of the risks fraught in the said challenge and the successful party is compensated by means of interest, if awarded.

¶38In the present case, the present execution petition was filed immediately upon the objections under Section 34 being dismissed. The Decree Holder obviously understood, rightly so, that the award became an executable decree immediately upon the challenge having failed. At that stage the awarded amount stood crystallised. What is being enforced in this case is the award, as per Section 36. Unless the award has been modified by the appellate forums leading to merger, the award as it is, is being enforced. The award acquired finality only when the Supreme Court finally dismissed the challenge to the award. Until then, this award could not be enforced, though the present execution was pending during the said period. The principle in an execution petition is that the Decree Holder should be placed in the same position as he would have been if he had received the money on the date of the award. The contract was in US Dollars. MMTC also conducts business in foreign exchange. As per the principles culled out from the above decisions, the Decree Holder is entitled to receive the sum only when finality attaches to the award, which in this case, happened on 12th February, 2019 when the review petition was dismissed by the Supreme Court.

¶39Thus, the rate of conversion that ought to be applied would be 1 USD = INR 70.93, as applicable on 12th February 2019. The calculations have

been submitted by the parties.  Accordingly, it is directed that a sum of Rs.53,16,05,138/- be paid by MMTC to the Decree Holder within four weeks;  A further sum of Rs.61,56,276/- be also paid by MMTC to the Decree Holder within four weeks.

¶40All approvals by the relevant authorities be also granted expeditiously and not later than two weeks.

¶41The petition is allowed in the above terms.

PRATHIBA M. SINGH JUDGE FEBRUARY 18, 2019 MR/dk

(Corrected & released on 27th February, 2019)

* IN THE HIGH COURT OF DELHI AT NEW DELHI Date of Decision: 18th February, 2019 + EX.P. 164/2015 and EX.APPL.(OS) 1229/2015 TRAMMO AG ..... Decree Holder Through: Mr. Rajiv Nayar, Sr. Advocate with Mr. Omar Ahmad and Mr. Nirman, Advocates (M: 9873274989). versus MMTC LIMITED ..... Judgement Debtor Through: Mr. Debal Kumar Banerji, Sr. Advocate with Ms. Suman Yadav and Mr. Ayush Dhawan, Advocates ( M: 9910044138). CORAM: JUSTICE PRATHIBA M. SINGH Prathiba M. Singh, J. (Oral) 1. The present petition seeks execution of award dated 25th November, 2014 passed under the aegis of Indian Council of Arbitration. The relevant portion of the said award is as under:- "63. Based on the foregoing, the Tribunal hereby makes issues and publishes this Final Award as follows: a. The Respondent shall pay the Claimant the sum of US$ 3,465,000 with interest thereon computed at the rate of 12% per annum from 4th of January 2012 up to the date of this Award. From the day after the date of this Award up to the date of payment interest shall be payable at the rate of 18% per annum; b. The Respondent shall pay the Claimant the sum of US$ 8,252.50 with interest thereon computed at the rate of 12% per annum from 4th January 2012 up to the date of this Award. From the day after the date of this Award up to the date of payment interest shall be payable at the rate of 18% per annum; c. The Respondent shall pay the Claimant the sum of USD 103,146.58 being legal costs. d. The Respondent shall pay the fees and expenses of the Tribunal as follows: i. The Tribunal's travel costs and expenses of the sum of USD 11,801.84; ii. The Tribunal's fees amounting to the total of Indian Rupees 4,473,000. Where any such fees and expenses have been paid by the Claimant, the Respondent shall fully reimburse the Claimant for the same. e. The Respondent shall pay to the ICA the sum of Indian Rupees USD 1,157,000 towards the administrative fees of the ICA. Where any such fees have been paid by the Claimant, the Respondent shall fully reimburse the Claimant for the same. f. The Respondent shall pay the Claimant the sum USD 51,999.84 towards payment of Lloyd Michaux's costs and Claimant's witnesses and representatives travel expenses costs; g. The Respondent shall pay the Claimant the sum of Indian Rupees 526,276 towards Claimant's expense for hotel and local travel; h. The Respondent shall bear the whole of its own legal fees and costs in connection with the Arbitration; and i. All other claims of the Claimant and the claims of the Respondent are dismissed." 2. A challenge to the award was made under Section 34 of the Indian Arbitration Act, 1996 however, the same was dismissed vide judgement dated 11th March, 2015. 3. The present execution petition was filed on 21st April, 2015 upon the dismissal of the Section 34 petition. 4. Thereafter, MMTC preferred an appeal to the Ld. Division Bench of this Court, which was dismissed vide judgement dated 22nd January, 2016. MMTC, thereafter preferred a Special Leave Petition to the Supreme Court, which was again dismissed on 14th November, 2018. A review petition was also filed by MMTC before the Supreme Court, which is now stated to have been dismissed on 12th February, 2019. 5. The award, which has finally been upheld by the Supreme Court is sought to be executed by way of the present petition. The only question is in respect of the foreign exchange rate to be applied as the award is in US dollars. The issue to be considered is - What is the foreign exchange rate to be applied? Whether the same should be calculated on the basis of conversion rate on the date of the award or on the date of dismissal of the Section 34 petition or on the date of dismissal of the SLP or on the date of dismissal of the review petition or finally on the date when the execution petition is being disposed of. 6. Ld. counsel for the Decree Holder relies upon the judgement of the Supreme Court in Forasol versus Oil and Natural Gas Commission, 1984 (supp) SCC 263,