How To Determine Conversion Of Arbitral Award In Foreign Currency To Indian Currency? 

Summary:

[1]The Supreme Court of India clarified the date for determining the foreign exchange rate when converting a foreign arbitral award to Indian currency. The Court held that the relevant date for conversion is the date when the award becomes enforceable, i.e., when objections against it are finally decided. Additionally, when a partial amount is deposited by the award debtor during the pendency of the proceedings, the conversion rate for that amount is determined on the date of the deposit, irrespective of whether the award holder withdraws the amount or not.

Facts:

A foreign arbitral award was passed in favour of the respondent, expressed in foreign currency. The award debtor deposited a partial amount of Rs. 7.5 crores during the pendency of the proceedings in 2010. The respondent did not withdraw the deposited amount, and later, upon the award’s enforceability, sought a conversion of the entire award at a higher exchange rate applicable at that time.

Issue:

What is the appropriate date to determine the foreign exchange rate for converting an award expressed in foreign currency to Indian rupees?

What is the date of conversion when the award debtor deposits some amount before the court during the pendency of proceedings challenging the award?

Judgment:

1. Date for Determining Conversion Rate: The Court held that the relevant date for determining the exchange rate for converting a foreign award is the date on which the award becomes enforceable, i.e., when the objections against its enforceability are finally decided. This decision was based on the principles laid down in Forasol v. Oil and Natural Gas Commission (1984 Supp SCC 263).

• Date of Conversion for Deposited Amount: The Court ruled that when the award debtor deposits an amount during the pendency of proceedings, the conversion rate for that amount is determined on the date of the deposit. This ruling applies even if the award holder does not withdraw the deposited amount immediately. The Court rejected the respondent’s argument that the conversion rate should be determined based on the date of enforcement of the entire award to benefit from a higher exchange rate.

Analysis:

The Supreme Court’s judgment underscores the principle that the conversion of foreign arbitral awards should be fair and equitable. By clarifying that the conversion rate is determined based on the enforceability date and not the date of the award itself, the Court ensures that the award holder does not gain an undue advantage from fluctuating exchange rates. The decision regarding the conversion of partial deposits during proceedings further emphasizes fairness, preventing the award holder from benefitting from a higher exchange rate at a later stage while still having the opportunity to utilize the deposited amount. This judgment provides clarity and consistency in the enforcement of foreign arbitral awards in India.

[1] https://api.sci.gov.in/supremecourt/2018/21747/21747_2018_15_1501_54502_Judgement_08-Aug-2024.pdf

BEFORE THE HON’BLE SUPREME COURT

DLF Ltd. (formerly known as DLF Universal Ltd.) and Anr. v. Koncar Generators and Motors Ltd.

CIVIL APPEAL NO. 7702 OF 2019

Judgment dated 08th August, 2024