1. Regular interest wrongfully withheld US $2,130,785.52
2. Compensatory damages up to March 31, US $6,347,748.50 1986 on the above regular interest continuing at the annual rate of 8 per cent on the said regular interest until payment.
3. Delinquent interest on late payments of US $467,076.20 principal
4. Compensatory damages up to March 31, 1986 US $1,324,357.75 on the above delinquent interest continuing at the annual rate of 8 per cent on the said delinquent interest until payment
5. Spare parts US $ 119,053.00
6. Compensatory damages up to March 31, 1986 US $276,702.17 on the above spare parts continuing at the annual rate of 8 per cent on the said sum for the spare parts until payment.
7. Towards costs of General Electric Us $1,549,899.00 Total US $12,215,622.14 The Arbitral Tribunal has awarded interest at the annual rate of 8 per cent on items 1, 3 and 5.
(i) the award could not be filed as it did not become binding on the parties in the country in which the award was made as prescribed under Section 7(1)(a)(v) of the Foreign Awards Act and Rule 801(c) of the Rules framed by the Bombay High Court under the Foreign Awards Act; (ii) the Bombay High Court did not have the territorial jurisdiction to entertain the petition of General Electric under Section 5 of the Act; (iii) General Electric had failed to comply with the mandatory requirement of Section 8(1)(a) of the Foreign Awards Act and Rule 801(a) of the Rules framed by the Bombay High Court under the Foreign Awards Act inasmuch as neither the original award nor a copy thereof duly authenticated as required by the law of the country had been produced along with the application; (iv) the award sought to be enforced was a nullity and should be ignored as the arbitrators had become functus officio in view of institution of Suit No. 127 of 1982 by Renusagar in the Court of Civil Judge, Mirzapur and refusal by the Mirzapur Court to stay the suit under Section 3 of the Foreign Awards Act; (v) the award could not be enforced in view of Section 7(1)(b)(ii) of the Foreign Awards Act because its enforcement was contrary to public policy; (vi) the claim for regular interest was barred by limitation; (vii) the claim for delinquent interest had been wrongly accepted by the arbitrators;
(viii) the award of interest on interest or compensatory damages in lieu of interest on regular interest and delinquent interest and the award of compound interest is contrary to public policy; (ix) the compensatory damages were excessive and unusual; (x) the Chairman of the Arbitral Tribunal was biased against Renusagar; and (xi) the costs of arbitration were unconscionable and excessive.
"7. Conditions for enforcement of foreign awards.- (1) A foreign award may not be enforced under this Act-
(a) if the party against whom it is sought to enforce the award proves to the court dealing with the case that-
(i) the parties to the agreement were under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it, or failing any indication thereon, under the law of the country where the award was made; or
(ii) that party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
(iii) the award deals with questions not referred or contains decisions on matters beyond the scope of the agreement: Provided that if the decisions on matters submitted to arbitration can be separated from those not submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or
(iv) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(v) the award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made; or
(b) if the Court dealing with the case is satisfied that-
(i) the subject-matter of the difference is not capable of settlement by arbitration under the law in India; or
(ii) the enforcement of the award will be contrary to public policy;
(2) If the Court before which a foreign award is sought to be relied upon is satisfied that an application for the setting aside or suspension of the award has been made to a competent authority referred to in sub-clause
(v) of clause (a) of sub-section (1), the Court may, if it deems proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to furnish suitable security."
(x) compensatory damages awarded on delinquent interest under item No. 4 constitutes award of damages upon damages which is contrary to public policy of India; (xi) award of compensatory damages on regular interest under item No. 2 in respect of the period from 1970 to 1980 when the interim order passed by the Delhi High Court in the writ petition was operative was impermissible and against public policy;
(xii) the amount awarded as costs is unconscionable and constitutes unjust enrichment inasmuch as it includes the amount which was admitted as part of the legal fees and expenses for proceedings in India and which was found to be inadmissible by the Arbitral Tribunal and the same amount was transposed into cost of the arbitration on the pretext that the material collected for litigation in India was also used in the arbitration proceedings; and (xiii) there has been violation of principles of natural justice inasmuch as the vouchers of costs regarding legal fees and expenses were never shown or given to Renusagar nor were its objections heard in this regard.
(viii) the challenge to the award on the basis of unjust enrichment, award of compound interest, award of damages on damages does not fall within the ambit of permissible objections on the ground of violation of public policy in Section 7(1)(b)(ii) of the Foreign Awards Act; (ix) there is no violation of the provisions of FERA because in view of the approval that had already been granted by the Government of India to the original contract, there was no prohibition against remittance of regular interest on the instalments which had become due and payable and the refusal on the part of the Government to give approval to rescheduling of the payment of instalments did not in any way preclude the Government of India from granting necessary permission for remittance of the interest on the unpaid instalments under Section 9 of FERA; (x) in any event, the bar of Section 9 of FERA is not applicable to the proceedings for enforcement for the award in view of Section 47(3) of FERA and the enforcement of the award does not involve contravention of the provisions of FERA; (xi) the costs that have been awarded are reasonable and that three copies of the supporting vouchers except for the vouchers relating to fees of M/s Amarchand Mangaldas, a Bombay/Delhi firm of Solicitors, were sent to all the three arbitrators and that one set of billings of M/s Amarchand Mangaldas was sent to the Chairman but copies of the letter addressed to Chairman were sent to the other Arbitrators and that the bills of M/s Amarchand Mangaldas were in respect of fees of Indian lawyers in Bombay High Court and Supreme Court which claim of costs has been disallowed by the Arbitral Tribunal;
(xii) the rate of exchange for conversion of foreign currency in proceedings for enforcement of a foreign award is governed by lexfori, i.e., law of the forum in which the proceedings have been instituted and not by the proper law of contract or law of place of performance; (xiii) the relevant date for conversion of U.S. dollars into Indian rupees in proceedings for enforcement of a foreign award is the date of actual payment and not the date of judgment as held by the Division Bench of the High Court; (xiv) the decision of this Court in Forasol v. O.N.G.C.4 on which the reliance has been placed by the Division Bench has no application and in any event the said decision does not lay down the correct law and needs reconsideration; (xv) although under the award interest has been awarded at 8 per cent in respect of items 1, 3 and 5 only but in view of the interim order passed by this Court on February 21, 1990 interest at the rate of 10 per cent is payable on the entire amount; (xvi) since the permission was not granted to General Electric by the Reserve Bank of India to transfer the sum of Rs 10.92 crores deposited by Renusagar in pursuance to the orders of this Court dated February 21, 1990 and November 6, 1990 the said amount should be adjusted against the decree that is ultimately passed after converting the decretal amount in U.S. dollars to Indian rupees on the basis of the rate of exchange prevailing on the date of the judgment of this Court.
(1) What is the scope of enquiry in proceedings for enforcement of a foreign award under Section 5 read with Section 7 of the Foreign Awards Act?
(II) Were Renusagar unable to present their case before the Arbitral Tribunal and consequently the award cannot be enforced in view of Section 7(1)(a)(ii) of the Foreign Awards Act?
(III) Does Section 7(1)(b)(ii) of the Foreign Awards Act preclude the enforcement of the award of the Arbitral Tribunal for the reason that the said award is contrary to the public policy of the State of New York?
(IV) What is meant by 'public policy' in Section 7(1)(b)(ii) of the Foreign Awards Act?
(V) Is the award of the Arbitral Tribunal unenforceable as contrary to public policy of India on the ground that-
(a) it involves contravention of the provisions of FERA;
(b) it penalises Renusagar for acting in accordance with the interim order passed by the Delhi High Court in the writ petition filed by Renusagar challenging the withdrawal of exemption from income tax on the interest paid to General Electric;
(c) it results in charging of interest on interest which is compounded and also damages on damages;
(d) it would lead to unjust enrichment for General Electric.
(VI) Which law would govern the rate of exchange for conversion of foreign currency in proceedings for enforcement of a foreign arbitral award?
(VII) Does Forasol v. O.N.G.C4 need reconsideration?
(VIII) Is General Electric entitled to interest pendente lite and future interest and if so, at what rate?
(IX) What should be the rate for conversion into U.S. dollars of the amount of Rs 10.92 crores deposited by Renusagar in pursuance to the interim orders passed by this Court on February 21, 1990 and November 6, 1990 and which has been withdrawn by General Electric?
"It is a generally accepted interpretation of the Convention that the court before which the enforcement of the foreign award is sought ma y not review the merits of the award. The main reason is that the exhaustive list of grounds for refusal of enforcement enumerated in Article V does not include a mistake in fact or law by the arbitrator. Furthermore, under the Convention the task of the enforcement judge is a limited one. The control exercised by him is limited to verifying whether an objection of a respondent on the basis of the grounds for refusal of Article V(1) is justified and whether the enforcement of the award would violate the public policy of the law of his country. This limitation must be seen in the light of the principle of international commercial arbitration that a national court should not interfere with the substance of the arbitration." (p. 269)
"The New York Convention does not permit any review on the merits of an award to which the Convention applies and in this respect, therefore, differs from the provisions of some systems of national law governing the challenge of an award, where an appeal to the courts on points of law may be permitted." (Redfern & Hunter, Law and Practice of International Commercial Arbitration, 2nd Edn., p. 46 1.)
"5. At the beginning of the hearing, the Tribunal will be prepared to hear submissions if necessary on the adequacy of the evidence before us on the relevant issues of U.S. foreign tax credit. But the main purpose of the meeting is to deal with the respondent's counter-claims together with the claimant's claims for 119,053 U.S. dollars (unpaid purchase price of spare parts) and 103,500 U.S. dollars (unpaid repairs on 75 M.V.A. Transformers).
6. All the above counter-claims and claims are old, so before going into details as to merit, the Tribunal will wish to consider submissions on the raised issues of limitation, laches, estoppel, abandonment and whether the right party is being sued."
"7. Conditions for enforcement of foreign awards.- (1) In order that a foreign award may be enforceable under this Act it must have-
(a) been made in pursuance of an agreement for arbitration which was valid under the law by which it was governed, 5 (1969) 3 SCC 562: (1970) 3 SCR 53
(b) been made by the Tribunal provided for in the agreement or constituted in manner agreed upon by the parties,
(c) been made in conformity with the law governing the arbitration procedure,
(d) become final in the country in which it was made,
(e) been in respect of a matter which may lawfully be referred to arbitration under the law of British India, and the enforcement thereof must not be contrary to the public policy or the law of British India.
(2) A foreign award shall not be enforceable under this Act if the Court dealing with the case is satisfied that-
(a) the award has been annulled in the country in which it was made, or
(b) the party against whom it is sought to enforce the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case, or was under some legal incapacity and was not properly represented or,
(c) the award does not deal with all the questions referred or contains decisions on matters beyond the scope of the agreement for arbitration:
Provided that if the award does not deal with all questions referred the Court may, if it thinks fit, either postpone the enforcement of the award or order its enforcement subject to the giving of such security by the person seeking to enforce it as the Court may think fit.
(3) If a party seeking to resist the enforcement of a foreign award proves that there is any ground other than the non- existence of the conditions specified in clauses (a), (b) and (c) of sub-section (1), or the existence of the conditions specified in clauses (b) and (c) of sub-section (2), entitling him to contest the validity of the award, the Court may, if it thinks fit, either refuse to enforce the award or adjourn the hearing until after the expiration of such period as appears to the Court to be reasonably sufficient to enable that party to take the necessary steps to have the award annulled by the competent tribunal."
"Enforcement of a Convention award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to enforce the award."
"The New York Convention is to the same effect. Accordingly, though the 1975 Act does not so specify, it must be taken that reference is intended to English public policy which indeed is the only public policy into which the English courts can sensibly inquire."
The same view is expressed in Dicey & Morris on The Conflict of Laws, 11th Edn., Vol. I at pp. 586-7.
"In fact, a body of law like the common law, which has grown up gradually with the growth of the nation, necessarily acquires some fixed principles, and if it is to maintain these principles it must be able, on the ground of public policy or some other like ground, to suppress practices which, under ever new disguises, seek to weaken or negative them."
(History of English Law, Vol. III, p. 55)
(1986) 1 ATC 103: (1986)2 SCR 278,372,narrow view' and the 'broad view'. According to the narrow view courts cannot create new heads of public policy whereas the broad view countenances judicial law making in this areas. (See : Chitly on Contracts, 26th Edn., Vol. I, para 1133, pp. 685-686). Similar is the trend of the decision in India. In Gherulal Parakh v. Mahadeodas Maiya7 this Court favoured the narrow view when it said:
"... though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is admissible in the interest of stability of society not to make any attempt to discover new heads in these days" (p. 440)
"Exceptionally, the English court will not enforce or recognise a right conferred or a duty imposed by a foreign law where, on the facts of the particular case, enforcement or, as the case may be, recognition, would be contrary to a fundamental policy of English law. The court has, therefore, refused in certain cases to apply foreign law where to do so would in the particular circumstances be contrary to the interests of the United Kingdom or contrary to justice or morality." (See : Halsbury's Laws of England, 4th Edn., Vol. 8, para 418.)
"This concern of law in the protection of social institutions is reflected in its rules of both municipal and conflict of laws.
Although the concept of public policy is the same in nature in these two spheres of law, its application differs in degree and occasion, corresponding to the fact that transactions containing a foreign element may constitute a less serious threat to municipal institutions than would purely local transactions." (R.H. Graveson : Conflict of Laws, 7th Edn., p. 165) 7 1959 Supp 2 SCR 406: AIR 1959 SC 781 8 (1974) 2 SCC 472, 482: (1975) 1 SCR 575, 584 9 (1991) 3 SCC 67, 76-77 10 (1983) 1 AC 145,164: (1982) 2 All ER 144,158
"The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal." (p. 111)
"(i) Where the fundamental conceptions of English justice are disregarded;
(ii) Where the English conceptions of morality are infringed;
(iii) Where a transaction prejudices the interests of the United Kingdom or its good relations with foreign powers;
(iv) Where a foreign law or status offends the English conceptions of human liberty and freedom of action;"
(See : Cheshire and North, Private International Law, 12th Edn.,pp. 131-133.)
"If there is no authority binding on us which specifically adopts that supposed doctrine, or principle, we should unhesitatingly decline to make 11 224 NY 99 (1918) 12 (1978) 2 Lloyd's LR 223 new law to that effect in this case. We should regard it, on balance, as being contrary to public policy for such a principle to apply." (p. 300)
"We cannot have trade and commerce in world markets and international waters exclusively on our terms, governed by our laws, and resolved in our Courts." (Fritz Scherk v. Alberto-Culver Co. 16)
"We conclude that concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercia l system for predictability in the resolution of disputes require that we enforce the parties' agreement, even assuming that 13 (1987) 2 All ER 769 14 (1824) 2 Bing 229, 252: (1824-34) All ER Rep 258, 266 15 508 F 2d 969 (1974) 16 41 L Ed 2d 270, 279, 281 : 417 US 506 17 87 L Ed 2d 444 a contrary result would be forthcoming in a domestic context." (pp. 456457)
(a) would involve contravention of the provisions of FERA;
(b) would amount to penalising Renusagar for not disregarding the interim orders passed by the Delhi High Court in the writ petition filed by Renusagar;
(c) would enable recovery of compound interest on interest;
(d) would result in payment of damages on damages;
(e) would result in unjust enrichment by General Electric;
We will examine the submissions of learned counsel under each head separately.
"It cannot be doubted that legislation intended to protect the economy of the nation and the general welfare of its inhabitant s regardless of their nationality by various measures of foreign exchange control or by altering the value of its currency, is recognised by foreign courts although its effect is usually partially confiscatory. Probably there is no civilized country in the world which has not at some stage in its history altered its currency or restricted the rights of its inhabitants to purchase the currency of another country. (p. 349) In my judgment these courts must recognize the right of every foreign State to protect its economy by measures of foreign exchange control and by altering the value of its currency. Effect must be given to those measures where the law of the foreign State is the proper law of the contract or where the movable is situate within the territorial jurisdiction of the State."(p.351)
"212. (1) A contractual obligation may be invalidated or discharged by exchange control legislation if-
(a) such legislation is part of the proper law of the contract; or
(b) it is part of the law of the place of performance; or
(c) it is part of English law and the relevant statute or statutory instrument is applicable to the contract:
Provided that foreign exchange legislation will not be applied if it is used not with the object of protecting the economy of the foreign State, but as an instrument of oppression or discrimination." (See : Dicey & Morris, The Conflict of Laws, 11 th Edn., Vol. II, 1466.)
"An English court would clearly refuse to enforce a contract the making or performance of which was prohibited by the Exchange Control Act, 1947 (now suspended) or by any statutory instrument made in virtue of that Act, or which was prohibited by earlier United Kingdom exchange control legislation. This would apply irrespective of the proper law of the contract and irrespective of the place of performance. The question whether the Act or statutory instrument applied to the transaction would have to be answered by construing it in accordance with the principles of statutory interpretation which are part of English law. If it did so apply, it would be an example of an 'overriding statute'."
18 1950 AC 24, 27, 36, 46-47, 57 : (1949) 2 All ER 621 19 1950 AC 57,72, 78: (1949) 2 All ER 671 20 (1956) 1 Ch 323 (See: Dicey & Morris, op. cit. p. 1469.)
"If Regulation 2 did extend to this transaction it forbade the very act of borrowing, not merely the contractual promise to repay. The act itself being forbidden, I do not think that it can be a source of civil rights in the courts of this country.... A court that extended a remedy in such circumstances would merit rather to be blamed for stultifying the law than to be applauded for extending it." (p. 341)
"That the transactions concluded between the parties are not subject to Austrian but to Dutch law is irrelevant because domestic law is applicable to the examination whether there has been a sale and purchase on a margin basis, for determining whether enforcement is to be refused. According to Article 81, para 4, of the Austrian Law on Enforcement Procedure, enforcement has to be refused if sought for awards rendered in respect of claims which, under Austrian law, cannot be brought before Austrian courts. This is a specific, special provision of domestic Austrian law on public policy." (p. 422)
(See: F.A. Mann, The Legal Aspect of Money, 5th Edn., (1992) p. 403,note 31.)
23 (1986) 1 SCC 264, 314: 1985 Supp 3 SCR 909, 981 24 (1987) 1 SCC 542, 546: (1987) 1 SCR 981, 987
obligation to pay future interest from June 30, 1967 onwards till payment and that these two claims have been preferred by GEC before the Court of Arbitration of I.C.C. as arising not merely 'out of but 'under the contract'." (pp. 477-478)
"Neither the provisions of this Act nor any term (whether express or implied) contained in any contract that anything for which the permission of the Central Government or the Reserve Bank is required by the said provisions shall not be done without that permission, shall prevent legal proceedings being brought in India to recover any sum which, apart from the said provisions and any such term, would be due, whether as debt, damages or otherwise, but-
(a) the said provisions shall apply to sums required to be paid by any judgment or order of any court as they apply in relation to other sums;
(b) no steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as the Central Government or the Reserve Bank, as the case may be, may permit to be paid; and
(c) for the purpose of considering whether or not to grant such permission, the Central Government or the Reserve Bank, as the case may be, may require the person entitled to the benefit of the judgment or order and the debtor under the judgment or order, to produce such documents and to give such information as may be specified in the requisition."
"Sub-section (3) allows legal proceedings to be brought to recover sum due as a debt, damages or otherwise, but no steps shall be taken to enforce the judgment, etc., except to the extent permitted by the Reserve Bank. The effect of these provisions is to prevent the very thing which is claimed here, namely, that the Foreign Exchange Regulation Act arms persons against performance of their contracts by setting up the shield of illegality. An implied term is engrafted upon the contract of parties by the second part of sub-section (2), and by sub-section (3), the responsibility of obtaining the permission of the Reserve Bank before enforcing judgment, decree or order of Court, is transferred to the decree-holder. The section is perfectly plain, though perhaps it might have been worded better for which a model existed in England." (p. 1031)
"The person entitled to the payment issues a writ. The fact that permission has not been obtained is not a defence to the action. On the one hand, the plaintiff can obtain judgment, the money due under the judgment being subject to Part 11 of the Act and the Rules to which I have referred. The defendant assuming that he is admitting liability, apart from the provisions of the Act, can make a payment into court. The Act, is not to be used to enable the defendant to retain the money in his pocket but to control its reaching its destination, namely, the plaintiff." (p. 253)
"Pending the hearing and final disposal of this petition for an interim order an injunction restraining the respondent and its officers, servants and agents from taking any steps on proceedings in enforcement furtherance, pursuance or implementation or in any manner giving effect to the said orders both dated September 11, 1969 or from preventing the payment by the petitioner of tax free interest of 6 per cent per annum to IGE in accordance with the approval granted by the respondent Orders dated September 8, 1965 and June 7, 1967 and to grant an ex parte order pending notice."
"Mr Ravinder Narain states that he will give security, of the assets of the company to the satisfaction of the Commissioner of Income Tax, Lucknow for Rs Four lakhs. Let this be done within a month from today. Interim injunction and stay to continue. In default of compliance, as above, petition for stay will stand dismissed."
"But we see no reason for allowing the reluctance of the common law to extend to cases where the defendant's breach of contract or negligence has caused the plaintiff to pay away or the defendant to withhold money and, as a result, the plaintiff has been deprived of the use of the money so paid away or withheld." (p. 218) 28 1893 AC 429 : (1891-94) All ER Rep Ext 1610 29 (1981) 2 All ER 401 30 (1984) 2 All ER 773 31 (1989) 63 Aus LJR 210 They upheld the decision of the Full Court of South Australia awarding damages for the added cost of funding the business with borrowed money as result of the loss of the use of money overpaid in tax by awarding compound interest for the reason that simple interest would not reflect accurately the extent of the respondent's loss since simple interest almost undercompensates the injured party's true loss. It was observed:
"The disdain of the common law for interest especially compound interest, is a relic from the days when interest was regarded as necessarily usurious." (p. 218) Brennan and Deane JJ. have expressed their general agreement with the reasons given by Mason, C.J. and Wilson, J. but Dawson, J. has given a dissenting judgment.
38 1953 SCR 789 : AIR 1953 SC 235 : (1953) 23 Comp Cas 307
" Even if the law has not yet developed to that extent, it does not follow from the absence of a general doctrine of unjust enrichment that the specific remedies provided are not justifiable by reference to the principle of unjust enrichment even if they were originally found without primary reference to it." (pp. 1313-1314, para 2037)
"As Hanover points out, since it will be taxed when it recovers damages from United for both the actual and the trebled damages, to diminish the actual damages by the amount of the taxes that it would have paid had it received greater profits in the years it was damaged would be to apply a double deduction for taxation, leaving Hanover with less income than it would have had if United had not injured it." (p. 1247)
41 20 L Ed 2d 1231 : 392 US 481 (1968)
43 1976 AC 443: (1975) 3 All ER 801 44 1975 QB 416: (1975) 1 All ER 152 foreign currency or its sterling equivalent and the conversion shall be at the date of payment, i.e., the date when the courts authorise enforcement of the judgment in terms of sterling. The said decision was, however, confined in its application to foreign money obligations and the court left open for future discussion the question whether the rule applying to money obligations should apply as regards claims for damages for breach of contract or for tort. In his dissenting opinion, Lord Simon, has reiterated the law laid down in Havana Railways case 42. it may be of interest to note that Lord Wilberforce, who gave the leading speech in Miliangos case 43 had appeared in Havana Railway case 42 but failed to persuad the House of Lords to accept his contention. He, however, succeeded 15 years later, in having his views accepted by the House of Lords. Subsequently in Services Europe Atlantique Sud (Seas) of Paris v. Stockholms Rederiaktiebolag Svea of Stockholm45 the House of Lords has extended the rule laid down in Miliangos case 43 to claims for damages for tort and breach of contract. The rule laid down in Miliangos case 43 has been held to be applicable to an action at common law on a foreign judgment (See : Dicey & Morris, The Conflict of Laws, 11th Edn., Vol. 2, p. 146 1.) In relation to arbitral awards the matter had come up before the Court of Appeal in Jugoslavenska Oceanska Plovidba v. Castle Investment Co. InC.46 wherein it was held that an award could be made by the arbitrators in England in terms of U.S. dollar and that the same could be enforced by converting the foreign currency into sterling at the rate prevailing at the date of the award. While referring the said decision, Lord Wilberforce, in Miliangos case 43 has said:
"In the case of arbitration, there may be a minor discrepancy, if the practice which is apparently adopted (see the Jugoslavenska case(46) remains as it is, but I can see no reason why, if desired, that practice should not be adjusted so as to enable conversion to be made as at the date when leave to enforce in sterling is given." (p. 469)
"Where the breach or wrong occurred in a foreign country (especially by non-payment of money due there), the damages are measured in the currency of that country and the dollar equivalent calculated at the rate of exchange obtaining at the date of judgment can be recovered; where the breach or wrong occurred in the United States (especially by non- payment of foreign money due there), the damages, being measured in dollars, are to be converted at the rate of exchange of the date of breach or wrong."
(Mann: Legal Aspects of Money, 5th Edn., p. 347)
51 (1982) 137 DLR 3d 192 52 272 US 517 : 71 L Ed 383 (1926) 53 269 US 71 : 70 L Ed 168 (1925) 54 (1925) 211 NY Supp 53 55 (1921) 188 NY Supp 52 56 (1987) 658 F Supp 763 57 (1986) 783 F 2d 333 dollars and cents, rejecting lesser fractions, and no judgment or other proceeding, shall be considered erroneous for such means. Section 27 as amended reads as under:
"27. (a) Except as provided in sub-division
(b) of this section, judgments and accounts must be computed in dollars and cents. In all judgments or decrees rendered by any court for any debt, damages or costs, all executions issued thereupon, and all accounts arising from judicial proceedings shall be computed, as near as may be, in U.S. dollars and cents, rejecting lesser fractions, and no judgment or other proceeding, shall be considered erroneous for such means.
(b) In any case in which the cause of action is based upon an obligation denominated in a currency other than currency of the United States, a court shall render or enter a judgment or decree in the foreign currency of the underlying obligation. Such judgment or decree shall be converted into currency of the United States at the rate of exchange prevailing on the date of entry of the judgment or decree."
(1) the date when the amount become due and payable;
(2) the date of the commencement of the action;
(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 realised.
"... the plaintiff, who has not received the amount due to him in a foreign currency and, therefore, desires to seek the assistance of the court to recover that amount, has two courses open to him. He can either claim the amount due to him in Indian currency or in the foreign currency in which it was payable. I f he chooses the first alternative, he 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 convert 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 the amount became payable for he was entitled to receive the amount oil that date or, at his option, at the rate of exchange prevailing on the date of the filing of the suit because that is the 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 of the jurisdiction of the court will be the amount in Indian currency claimed in the suit. The plaintiff may, however, choose the second course open to him and claim 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 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 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. For the purposes of court- fees and jurisdiction the plaintiff should, however, value his claim 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 such rate of exchange is. He should further give an undertaking in the plaint that he 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 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 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 decree to be passed by the court should be one which orders the defendant to pay to the plaintiff the foreign currency sum adjudged by the court subject to the requisite permission of the concerned authorities under the Foreign Exchange Regulation Act, 1973, being granted, and 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 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 challenged in appeal or other proceedings and such appeal or other proceedings being decided in whole or 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 preceding the date of such decree or order. If such rate of exchange is different from the rate in the decree which has been challenged, the court should make the necessary modification with respect to the rate of exchange by its appellate decree or final order. In all such cases, execution can only issue for 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." (pp. 587-589)
"In the type of cases we are concerned with here just as the courts have power to make a decree for a sum of money expressed in a foreign currency subject to the limitations and conditions we have set out above, the arbitrators or umpire have the power to make an award for a sum of money expressed in a foreign currency. The arbitrators or umpire should, however, provide in the award for th e 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 umpire 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 or the date nearest or most nearly preceding the date of the judgment as the court may determine. If the arbitrators or 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 conversion or may do so itself taking the date of conversion as the date of its judgment or the date nearest or most nearly preceding it, following the procedure outlined above for the purpose of proof of the rate of exchange prevailing on such date. If however, 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 made a rule of the court, he would be at liberty to do so after obtaining the requisite permission of the concerned authorities under the FERA." (pp. 589-590)
"This situation involves two distinct questions: which is the legal system that determines whether there exists a right or a duty to convert the money of account into the (local) money of payment? Which is the legal system that governs the mechanics of the conversion (the type of the rate of exchange to be employed, tile date and the place with reference to which the rate is to be ascertained)?
As regards the first point it is necessary to repeat that, except in unusual circumstances, the creditor suffers no prejudice from payment in the moneta loci solutionis. It is suggested, therefore, that in general, i.e., where no problem of construction arises, the question of the right or duty of conversion may be treated as one relating to the mode of performance and, consequently, subject to the lex loci solutionis. The decision on the second point, however, is liable to encroach severely upon the substance of the obligation: whether the creditor who is entitled to be paid 1000 Spanish pesetas in Gibraltar must accept the pound equivalent calculated at the rate of peseta notes or of cable transfers to Madrid, or calculated with reference to the rate prevailing at the date of maturity or payment, or calculated at the Gibraltar or Madrid rate these are substantial matters on which the quantum eventually received by the creditor depends, if payment is not made in actual pesetas. These aspects, therefore, cannot be described as relating merely to the mode of performance, but ought to be subject to the proper law of the contract." (pp. 326- 327)
" It is now clear that English law does not require any foreign money obligation to be converted into sterling for the purpose of instituting proceedings or of the judgment; on the contrary, where the plaintiff claims a sum of foreign money, he is both entitled and bound to apply for judgment in terms of such foreign money and it is only at the stage of payment or enforcement that conversion into sterling at the rate of exchange then prevailing takes place. This is so whether the claim is for payment of a specific sum contractually due or for damages for breach of contract or tort or for a just sum due in respect of unjustified enrichment or for restitution. Nor does it matter whether the contract sued upon is governed by English or by foreign law. Nor is it necessary to ask for specific performance rather than payment: in either case the defendant will be ordered to pay foreign money. Moreover an award in an English arbitration may be expressed and enforced in foreign currency and a foreign award or judgment so expressed may be enforced like the English award or judgment." (p. 352)
"As regards the date with reference to which the rate of exchange is to be ascertained, the law is to a large extent settled. In connection with conversion for the purpose of proceedings the payment-date rule is firmly established. Outside proceedings the date depends on the construction of the contract, but there exists a strong tendency to apply the payment-date rule." (p. 436)
"The quantum of money tokens to be tendered is, however, always a matter of substance and not a question of the manner of performance. Hence it should always be governed by the proper law, irrespective of the place of payment." (p. 1454)
"210. Irrespective of the currency in which a debt is expressed or damages are calculated (money of account), the currency in which th e debt or liability can and must be discharged (money of payment) is determined by the law of the country in which such debt or liability is payable, but (semble) the rate of exchange at which the money of account must be converted into the money of payment is determined by the proper law of the contract or other law governing the liability.
If a sum of money expressed in a foreign currency is payable in England, it may be paid either in units of the money of account or in sterling at the rate of exchange at which units of the foreign legal tender can, on the day when the money is paid, be bought in London in a recognised and accessible market, irrespective of any official rate of exchange between that currency and sterling. Quaere, whether this rate of exchange also applies if English law is not the proper law of the contract."
At the beginning of the comment on the said rule, it has been stated: "This Rule deals with the question whether a debtor has, by making a payment in a given currency discharged the debt. The effect of proceedings in English court on a foreign currency obligation is not considered in this rule but in Rule 21 1." (pp. 1453-54). This would indicate that the observations relied upon (at p. 1454) which follow this statement have no bearing to the proceedings in a court on foreign currency obligations and have to be confined to payments by a debtor in discharge of the debt.
"If a debt or other liability expressed in a foreign currency is payable in England, the debtor may tender pounds in discharge. This is 'primarily a rule of construction' which was 'understandable at a time when foreign exchange was freely obtainable'. Where this is not the case, the rule may defeat the intention of the parties, and it may therefore 'require reconsideration. Despite a number of dicta to the contrary, the debtor may also discharge his liability by tendering the foreign currency in specie, but the creditor cannot compel him to do so. The rate of exchange to be applied is that of the day when the debt is paid." (11th Edn., Vol. II, p. 1454)
"211. (1) An English court can give judgment for an amount expressed in foreign currency. (2) For procedural reasons the amount of the judgment must be converted into sterling before execution can be levied. The date for conversion will be the date of payment, i.e., the date when the court authorises enforcement of the judgment, unless some other date is prescribed by statute."
(i) period prior to the date of reference to arbitration;
(ii) period during which the arbitration proceedings were pending before the arbitrators;
(iii) period from the date of award till the date of institution of proceedings in a court for enforcement of the award;
(iv) period from the date of institution of proceedings in a court till the passing of the decree; and
(v) period subsequent to the decree till payment.
"Interest on Awards.- Where and insofar as award is for the payment of money the Court may in the decree order interest, from the date of the decree at such rate as the Court deems reasonable, to be paid on the principal sum as adjudged by the award and confirmed by the decree."
Amount awarded by the Arbitral Tribunal : 12,215,622.14 Interest on US $ 2,716,914.72 (the total amount awarded under item Nos. 1, 3 and 5) @ 8% per annum from 1-4-1986 to 15-10-1986 in terms of theaward 117,733.00
12,333,355.14 Less: Amount paid by Renusagar in pursuance of the orders dated 21-2-1990 and 6-11-1990 during the pendency of the appeals in this Court 6,289,800.00
"(i) If any suit, appeal or other proceedings of whatever nature (hereinafter called 'the proceedings') by or against the Transferor Company be pending, the same shall not be abate, be discontinued or be in any way prejudicially affected by reason of the transfer or the undertaking of the Transferor Company or of anything contained in this Scheme but the said proceedings may be continued, prosecuted and enforced by or against the Transferor Company as if this Scheme had not been made."
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