Judgment:
% + IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment delivered on:
26. 05.2017 EX.P. 131/2015 & EA(OS) Nos. 643/2015 & 1012/2015 ROYAL CONSTRUCTION COMPANY PVT. LTD. versus NATIONAL PROJECTS CONSTRUCTION CORPORATION LTD. (NPCC) ..... Decree Holder ..... Judgement Debtor EX.P. 192/2015 & EA(OS) No.805-806/2015, 1011/2015 & 1033/2015 AND ROYAL CONSTRUCTION COMPANY PVT. LTD. versus NATIONAL PROJECTS CONSTRUCTION CORPORATION ..... Decree Holder ..... Judgement Debtor Advocates who appeared in this case: For the Decree Holder : For the Judgment Debtor : Mr A. P. S. Ahluwalia, Senior Advocate with Mr P. S. Bindra, Ms Rishika, Ms Ashmita and Mr Bhuvneshwar Tyagi. Mr Anup J.
Bhambhani, Senior Advocate with Mr Rajat Arora and Mr Jaypreet Singh. CORAM HON’BLE MR JUSTICE VIBHU BAKHRU VIBHU BAKHRU, J JUDGMENT1 Royal Construction Company Pvt. Ltd. (hereafter „RCCPL‟) has filed the present petitions for enforcement of an arbitral award dated Ex.P. Nos. 131/2015 & 192/2015 Page 1 of 12 10.08.2002 (hereafter „the award‟) made and published by the sole arbitrator. The award was made pursuant to the reference of disputes made between RCCPL and the respondent (NPCC), which had arisen in respect of an agreement dated 29.06.1982 (hereafter „the agreement‟). In terms of the aforesaid agreement, RCCPL had agreed to execute certain construction works to be carried out in Iraq, which were a part of a larger contract awarded to NPCC.
2. The contract value was agreed at 7,83,834/- Iraqi Dinars. Certain disputes arose between the parties and RCCPL preferred certain claims, which were referred to Justice P.N. Bhagwati, Former Chief Justice of India. However, he resigned and Mr R.P. Billimoria was appointed as a sole arbitrator in his place. The arbitrator considered the claims made by RCCPL and entered the award on 10.08.2002. The operative part of the award is set out below:-
"“After setting off the allowed counter claims of the respondent against the allowed claims of the claimant, I thus make the award as follows: a. The respondent shall pay ID22377.14 (Two lakh Twenty three thousand seven hundred seventy seven and point one four) to the claimant along with 12% interest p.a. from the date of commencement of arbitration proceedings i.e. 26.9.1988 upto the date of payment. b. The respondent shall also pay to the claimant a sum of Rs.20,00,000/- (Rupees Twenty lakhs) along with 12% interest p.a. from the date of encashment of bank guarantee upto the date of payment. c. The amount payable in ID shall be convertible into US dollars as per the original agreement dated 29.6.1982. Ex.P. Nos. 131/2015 & 192/2015 Page 2 of 12 Further, all payments of settlement in foreign exchange shall be made as per original agreement and Government rules. d. There shall be no order as to costs and the parties are left to bear their own costs. Award made and pronounced at New Delhi on 10th August, 2002.” 3. RCCPL (the petitioner) is an Indian company and it is not disputed that the award is to be discharged by payment in Indian Rupees. NPCC has already deposited certain sums with the Registry of this Court for discharging the awarded amount.
4. The principal controversy to be addressed, at this stage, concerns the rate for conversion of foreign exchange (US Dollars) to Indian Rupees.
5. The said controversy arises in the following context:-
"5.1 NPCC had filed an application (being OMP No.374/2002) under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter „the Act‟) for assailing the award. The said application was rejected by a co- ordinate bench of this court by an order dated 26.05.2008 as the court found no reason to interfere with the award. 5.2 NPCC appealed against the aforesaid order dated 26.05.2008 before the Division Bench of this court [being FAO(OS) No.589/2009].. Before the Division Bench, NPCC restricted its challenge to the rate of interest awarded by the arbitrator. The said appeal was disposed of by the Division Bench by an order dated 19.05.2014. Ex.P. Nos. 131/2015 & 192/2015 Page 3 of 12 5.3 The Division Bench observed that in terms of the agreement between the parties, 35% of the payments were to be released in Iraqi Dinars and the remainder was to be converted in US Dollars at the rate of 3.37778 US Dollars for each Iraqi Dinar. 5.4 The Division Bench of this Court, after considering the rival contentions, reduced the rate of interest from 12% per annum to 6% per annum. The court further held - and this is the bone of contention - that the date of the award would be reckoned as the date of the conversion from US Dollars to Indian Rupees. The relevant extract of the said judgment reads as under:-
"“11. It is in the aforesaid peculiar fact of 35% payment to be made in Iraqi Dinars and 65% to be paid in US Dollars that we are called upon to exercise our discretion on the subject of interest payable, which as per the award is 12% per annum.
12. The normal rule in commercial transactions, where payment is to be made in foreign currency is to be guided by the Libor rate of interest, which is normally between 3% to 4% per annum. The further problem would be that as of the date of the award and even today the value of Iraqi Dinar is as good as nil.
13. Since the appellant is now paying to the respondent the sum payable in Indian Rupees by converting the entire awarded sum, which is in Iraqi Dinars to US Dollars, at the agreed formula of 1 Iraqi Dinar equal to 3.37778 US Dollars, interest of justice would suffice if the agreed rate of interest is brought down to 6% per annum as per the award from the date thereof till payment. Ex.P. Nos. 131/2015 & 192/2015 Page 4 of 12 14. The next problem would be, as to what should be the date fixed for conversion of the US Dollar amount into Indian Rupees.
15. We are of the opinion that the date of conversion should be the one when the award was pronounced on account of the fact that if the award was satisfied on said date the appellant would be paid 35% in Iraqi Dinar. Said 35% of the sum awarded would virtually have no value then and even today. As regards the remaining 65% paid by converting the Iraqi Dinar into US Dollars, the respondent would firstly have the benefit of a virtually nil value Dinar being converted into valuable currency and thereafter payment being received in Indian Rupees.
16. The extremely peculiar facts and circumstances aforenoted is our reasons to modify the award as also to determine the date of the conversion rate.
17. The appeal is disposed of in aforesaid terms noting further that the amount received by the respondent pursuant to the orders passed by this Court would fall short of the amount payable to the respondent as per the award and as modified by us. Thus, the security furnished by the respondent is discharged.
18. The remaining amount as per the award, as modified by us, can be recovered by the respondents from the appellant on execution.” 5.5 NPCC preferred a review (Rev. Pet. No.297/2014) against the order dated 19.05.2014, which was also dismissed on 19.09.2014. 5.6 Aggrieved by the same, NPCC preferred a Special Leave Petition against the order dated 19.05.2014 passed by the Division Bench in FAO(OS) 589/2009 as well as the order dated 19.09.2014 passed in Review Petition No.297/2014. The Supreme Court was pleased to grant Ex.P. Nos. 131/2015 & 192/2015 Page 5 of 12 leave and allow the said appeals by an order dated 24.02.2015 [in Civil Appeal No.2543-2544/2015 arising out of SLP (C) Nos. 35841- 35842/2014 captioned as “M/s National Project Construction Corp. Ltd. v. M/s Royal Construction Co. Pvt. Ltd.”].. The operative part of the said decision reads as under:-
"“The issue that arises for consideration is whether the High Court should have fixed the date of conversion contrary to the agreement and contrary to the award which is in consonance with the agreement and further reduced the rate of interest. In our considered opinion, when the learned arbitrator had already, in clear terms, stated the date of conversion would be as per the original agreement dated 29.06.1982, the same could not have been changed. That apart, we do not see any justification to change the rate of interest as has been determined by the learned arbitrator. It needs no special emphasis to state that while dealing with an appeal from an order rejecting an application under Section 34 and the principles relating to arbitration. The High Court would not have passed such an order terming it as "mid-way approach". In view of the aforesaid, we allow the appeals and set aside both the orders passed by the High Court. Needless to emphasize, whatever the directions given in the award by the learned arbitrator shall govern the field. The amount that has been deposited before this Court in pursuance of the order dated 08.12. 2014 be refunded to the appellant. There shall be no order as to costs.” 6. Mr Bhambhani, learned Senior Counsel appearing for NPCC urged that order passed by the Supreme Court had clearly held that the date of conversion would be as specified in the award and as per the original Ex.P. Nos. 131/2015 & 192/2015 Page 6 of 12 agreement. He submitted that neither the award nor the agreement had provided for any date of conversion from US Dollars or Iraqi Dinars to Indian Rupees; but, the agreement did provide for conversion of Iraqi Dinars to US Dollars and the said conversion was fixed as on the date of the agreement - 29.06.1982. He contended that therefore, the conversion of the awarded amount to Indian Currency would necessarily have to be determined on the basis of the exchange rate as prevailing on the date of the agreement, that is, 29.06.1982.
7. He further contended that only 65% of the contracted payments were to be made in US Dollars and, therefore, only 65% of the award in Iraqi Dinars was to be converted to US Dollars.
8. Mr Ahluwalia, learned Senior Counsel appearing for RCCPL countered the aforesaid submissions. He submitted that the award was clear and the awarded amount was required to be converted into US Dollars. He submitted that the conversion from US Dollars to Indian Rupees would necessarily have to be at the exchange rate prevailing on the date when the payment is made. He relied upon the decision of the Supreme Court in Renusagar Power Co. Ltd. v. General Electric Co.:
1994. Supp (1) SCC644in support of his contention.
9. Mr Bhambhani sought to distinguish the aforesaid decision by contending that the exchange rate prevailing on the date of payment would be applicable only if the award was silent. He submitted that in the present case, the arbitrator had expressly indicated that all payments or settlements in foreign exchange shall be made as per the original agreement and government rules and, therefore, the rate of exchange rate prevailing on the date of agreement would have to be applied. Ex.P. Nos. 131/2015 & 192/2015 Page 7 of 12 10. I have heard the learned counsel for the parties.
11. There is no dispute that the agreement between the parties expressly provided for the rate of exchange for conversion from Iraqi Dinar to US Dollars. The relevant clause – clause 32.2 – of the agreement reads as under:-
"“Payment of works in progress 32.2 The monthly running account bills for the quantity of works executed by the Associate shall be presented to the Chief Project Manager, NPCC before the 10thof every month. The Associate shall be paid the net amount due after all deductions towards advances, retention money and recoveries towards cost of material and other services. The payment shall normally be made within 15 days of such presentation of the bills. All monthly payment shall be treated as advance payment only. The running payment shall be made in the form of 65% in US $ and 35% in I.D. The rate of exchange for the purpose of calculations will be 1 ID = 3.37778 U.S. Dollar and this rate of exchange shall be operated throughout the period of contract.” 12. Clause 32.8 of the agreement also reiterated that for “the purpose of conversion of Iraqi Dinar to US Dollars, the exchange rate of 1 Iraqi Dinars equivalent to 3.37778 US Dollars shall be applicable”.
13. The award also expressly provides that the amount payable in Iraqi Dinar would be convertible into US Dollars as per the original agreement dated 29.06.1982. Therefore, the amount of 2,23,777.14 Iraqi Dinars as awarded would necessarily have to be converted to US Dollars at the agreed exchange rate. Ex.P. Nos. 131/2015 & 192/2015 Page 8 of 12 14. The contention that only 65% of the amount awarded in Iraqi Dinars was required to be converted since clause 32.6 of the agreement indicated that payment against monthly bills would be made to RCCPL in Iraqi Dinars and US Dollars in the ratio of 35:65, is not merited for several reasons.
15. First of all, clause 32.6 of the agreement only pertains to monthly account bills, therefore, the interim monthly payments were to be made to RCCPL in the ratio of 35% Iraqi Dinars and 65% US Dollars. The said ratio was not applicable to the final payment and/or to the amount withheld by NPCC from the monthly account bills.
16. Secondly, the arbitrator had expressly observed the exchange rate from Iraqi Dinars to US Dollars to be as under:-
"“(iii) The contract value of these works was of the order of Iraqi Dinars 7,83,834 convertible into US Dollars at the agreement rate of exchange of 1 ID-3.37778 US Dollars. The above rate of exchange was to remain constant for all payments during the currency of the contract.” 17. Thirdly, the award unequivocally provides for payment of amount awarded in Iraqi Dinars to be converted into US Dollars as per the original agreement dated 29.06.1982.
18. There is no dispute that the entire amount awarded in Iraqi Dinars was convertible into US Dollars. This was also noted by the Division Bench in its order dated 19.05.2014 passed in FAO(OS) 589/2009. It was never the case of NPCC that only part of the amount awarded in Iraqi Dinars was required to be converted into US Dollars. Ex.P. Nos. 131/2015 & 192/2015 Page 9 of 12 19. The next question to be considered is the date on which US Dollars is to be converted into Indian Rupees. The Division Bench in its order dated 19.05.2014 had held that the date of conversion in Indian Rupees would be the date of the passing of the award. This was set aside by the Supreme Court. The Supreme Court unequivocally held that the date of conversion would be as per the original agreement dated 29.06.1982.
20. RCCPL has contended that the date of conversion from US Dollars to Indian Rupees should be as prevailing on the date when the payments are made in discharge of the awarded amount. In terms of the decision of the Supreme Court in Forasol v. Oil and Natural Gas Commission:
1984. (Supp) 1 SCC263 in cases where a decree is passed in terms of foreign currency, the date of conversion would be as specified in the decree or on the date when such decree becomes final and enforceable.
21. In the facts of the present case, it is tempting to accept RCCPL‟s contention that the date on which the award was passed or the date on which payments are made, ought to be taken as the date of conversion of the awarded amounts in US Dollars into Indian currency. However, such course is not permissible in view of order dated 24.02.2015 passed by the Hon'ble Supreme Court. This is so because the Division Bench of this Court had expressly held that the date of conversion from US Dollars to Indian Rupees would be the date of the award. This view was expressly rejected by the Supreme Court in the order dated 24.02.2015 and indicated that the date of conversion would be as per the original agreement dated 29.06.1982 and the same could not have been changed by this court.
22. In view of the above, this court's focus can only be to ascertain the date of conversion as available in the agreement dated 29.06.1982. On a Ex.P. Nos. 131/2015 & 192/2015 Page 10 of 12 plain reading, the agreement does not provide for conversion of US Dollars or Iraqi Dinars in Indian currency. The only exchange rate specifically mentioned in the agreement was conversion of Iraqi Dinars to US Dollars; and, admittedly, that date of conversion was the date of the agreement itself - 29.06.1982.
23. The contract itself was in Iraqi Dinars and part payment was to be made in Iraqi Dinar (35%) and the balance was required to be paid in US Dollars.
24. However, it is not disputed that both the parties being Indian concerns, the payment would not be made in US Dollars and the same would have to be discharged in Indian Rupees. This plainly indicates that the value of the contract, in Indian rupees, would have to be worked on the basis of converting Iraqi Dinars to US Dollars at the rate of 1 Iraqi Dinar as equal to 3.37778 US Dollars and it is obvious that for converting the same to Indian rupees, the date of conversion would have to be taken as the same, that is, the date of the agreement. Although, the arbitral award expressly directs that the amount payable in Iraqi Dinars shall be convertible into US Dollars as per the original agreement, it also directs that all payments of settlement in foreign exchange shall be made as per original agreement and Government Rules. Payment as per the original terms would necessarily have to be made in Indian currency equivalent to the US Dollars.
25. Thus, in view of the order dated 24.02.2015 passed by the Supreme Court for the purposes of conversion of US Dollars to Indian Rupees, the exchange rate as prevalent on the date of the agreement (29.06.1982) would be applicable. Ex.P. Nos. 131/2015 & 192/2015 Page 11 of 12 26. List for further proceedings on 18.07.2017. MAY26 2017 RK VIBHU BAKHRU, J Ex.P. Nos. 131/2015 & 192/2015 Page 12 of 12