Home > Recent Judgements >Applicable Foreign Exchange Rate At Different Stages Of The Arbitral Proceedings
August 16, 2024
BACKGROUND
The case DLF Ltd. (Formerly known as DLF Universal Ltd.) and Anr. Vs. Koncar Generators. Parties entered into a contract involving the design, manufacturing, and supply of generators. Arbitral tribunal awarded €10,93,989, to the respondent inclusive of amount of interest, maintenance, and legal expenses. The respondent filed for execution of the award in 2004, while the appellants contested it under various sections of the Arbitration and Conciliation Act, 1996 (the “Act”). The case involved matter regarding the conversion of the award amount from euros to Indian rupees, particularly concerning the applicable foreign exchange rate at different stages of the proceedings.
ISSUES
The primary legal questions that were dealt in were – What would be the correct date for determining the foreign exchange rate to convert the arbitral award amount from euros to Indian rupees and how should the conversion be handled when the award debtor deposits an amount before the court while contesting the award.
ARGUMENTS
Appellants’ Arguments
- The appellants argued that the exchange rate on the date of their deposit (22.10.2010) should apply for converting the award amount, asserting that the amount deposited was effectively converted at that time.
- They contended that the respondent had consented to the deposit and should not benefit from exchange rate fluctuations due to delays attributed to the respondent.
Respondent’s Arguments
- The respondent maintained that the exchange rate applicable on 01.07.2014 (when all objections were dismissed) should be used for converting the entire award amount.
- They argued that the deposit made by the appellants did not pass title to the amount and was not in satisfaction of the decree, thus the relevant date for conversion should be when the objections were finally resolved.
Decision
The court upheld the High Court’s decision, determining that the relevant date for converting the award amount to Indian rupees was 01.07.2014, the date when the objections against the award were dismissed.
The court reasoned that under the Act, a foreign arbitral award becomes enforceable when all objections are resolved. The judgment referenced the principles established in which indicated that the relevant date for conversion should align with when the award is deemed a decree. The court emphasized that allowing the appellants to benefit from exchange rate fluctuations due to their own delays would be inequitable.
Conclusion
The ruling clarified the principles regarding the conversion of foreign arbitral awards into local currency, emphasizing the importance of the enforceability date. The court held that the date of conversion will be the date when the objections against the award were dismissed. It underscored that the date of final resolution of objections is critical for determining the applicable exchange rate, thereby impacting the enforceability of foreign arbitral awards in India. The case sets a precedent for future disputes involving foreign currency awards and their conversion in the context of Indian law.
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