Supreme Court: Supreme Court rules on forex conversion date to hasten arbitral awards

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In a judgment that will speed up enforcement of foreign arbitral awards and clarify the uncertainties in making such payments, the Supreme Court on Thursday ruled that the relevant date for determining the conversion rate of foreign award amount expressed in foreign currency to Indian rupees is the date when the award becomes enforceable.

A Bench led by PS Narsimhan said that the statutory scheme of the Arbitration and Conciliation Act 1996 makes a foreign arbitral award enforceable when the objections against it are finally decided, therefore the relevant date for determining the conversion rate of foreign award expressed in foreign currency is the date when the award becomes enforceable.

“When the award debtor deposits an amount before the court during the pendency of objections and the award holder is permitted to withdraw the same, even if against the requirement of security, this deposited amount must be converted as on the date of the deposit,” it said in the case, DLF Ltd (erstwhile DLF Universal vs Koncar Generators and Motors.

The apex court said that after the conversion of the deposited amount, the same must be adjusted against the remaining amount of principal and interest pending under the arbitral award. “This remaining amount must be converted on the date when the arbitral award becomes enforceable, i.e., when the objections against it are finally decided.”

Two uncertainties had a direct bearing on the issues – the time lapse between the date of the award and its enforceability (a local factor), and the ever-fluctuating exchange rates (a global factor).

According to the court, once there is a deposit by the award debtor and the award holder is permitted to withdraw the same, even if such withdrawal is conditional and subject to the final decision in the matter, the court must consider that the award holder could access and benefit from such deposit. It is then the burden of the award holder to furnish security, as required by the court’s orders, to utilise the amount or to make an application for modification of the condition if it is unable to fulfil the same.Certain disputes arose between DLF Ltd and Koncar Generators and Motors, a Croatian company over engineering, manufacturing, and supply of two generators by the latter. The matter was referred to arbitration before the International Chamber of Commerce, Paris, which favoured Koncar and asked DLF to be jointly and severally pay Euros 10,93,989, along with interest in 2004.However, there was some disagreement on the date of conversion of the foreign current amount that was deposited in the court by DLF.



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