# DLF Ltd. (Formerly Known as DLF Universal Ltd) and Anr v. Koncar Generators and Motors Ltd

- **Citation:** 2024 INSC 593
- **Court:** Supreme Court of India
- **Decided:** 2024-08-08
- **Case number:** Civil Appeal No. 7702 of 2019
- **Bench:** Pamidighantam Sri Narasimha, Aravind Kumar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/dlf-ltd-formerly-known-as-dlf-universal-ltd-and-anr-v-koncar-generators-and-38096
- **Pages:** 31

## Headnote

The issue arising in the present appeal relates to enforcement of
an arbitral award expressed in foreign currency. In this context,
two questions arise for consideration. First, what is the correct
and appropriate date to determine the foreign exchange rate for
converting the award amount expressed in foreign currency to Indian
rupees. Second, what would be the date of such conversion, when
the award debtor deposits some amount before the court during
the pendency of proceedings challenging the award.
Headnotes†
Arbitration and Conciliation Act, 1996 - Arbitral Award -
Enforcement of an arbitral award expressed in foreign
currency - What is the correct and appropriate date to
determine the foreign exchange rate for converting the award
amount expressed in foreign currency to Indian rupees:
Held: The statutory scheme of the Act makes a foreign arbitral
award enforceable when the objections against it are finally
decided - Therefore, as per the Act and the principle in Forasol
case, the relevant date for determining the conversion rate of
foreign award expressed in foreign currency is the date when the
award becomes enforceable. [Para 20(i)]
Arbitration and Conciliation Act, 1996 - Arbitral Award -
Enforcement of an arbitral award expressed in foreign
currency - What would be the date of such conversion,
when the award debtor deposits some amount before the
court during the pendency of proceedings challenging the
award:
Held: 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
* Author
292
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security, this deposited amount must be converted as on the date
of the deposit - 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. [Para 20(ii)(iii)]
Arbitration and Conciliation Act, 1996 - Appellants are Indian
companies and the respondent is a Croatian company -
Dispute arose between the parties - Matter referred to
arbitration before the International Chamber of Commerce -
Arbitral tribunal passed its award dated 12.05.2004 in favour
of the respondent-claimant - Appellants then filed objections
against the award u/s. 48 - The appellants deposited Rs. 7.5
crores with the Executing Court on 22.10.2010 - Trial Court
dismissed the objections filed u/s. 48 - Appellants filed
a revision, which the High Court admitted by order dated
03.06.2011 - The High Court stayed the operation of the Trial
Court order dismissing objections, subject to the appellants
depositing a further amount of Rs. 50 lakhs, in addition to
Rs. 7.5 crores, with the Executing Court - The revision came
to be dismissed by the High Court on 01.07.2014, by which
the award attained finality as this order was not challenged
any further - What would be relevant conversion date of the
amount:
Held: The deposit of Rs. 7.5 crores was permitted for withdrawal by
furnishing a bank guarantee - So, the first deposit of Rs. 7.5 crores
must be converted as on the date of deposit being 22.10.2010 -
The second deposit of Rs. 50 lakhs pursuant to the High Court
order dated 03.06.2011 stands on a different footing from the first
deposit - This order did not permit the respondent to withdraw this
amount till the completion of the proceedings - Hence, the amount
cannot be converted as on the date of deposit as the respondent
could not have benefitted from the same - Here, the revision
proceedings were complete on 01.07.2014 - Thus, the second
deposit of Rs. 50 lakhs as well as the remaining amount due under
the award must be converted when the objections proceedings
attained finality on 01.07.2014 - The Executing Court, being the
Additional District Judge

## Text

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[2024] 8 S.C.R. 291 : 2024 INSC 593
DLF Ltd. (Formerly Known as DLF Universal Ltd) and Anr.
v.
Koncar Generators and Motors Ltd.
(Civil Appeal No. 7702 of 2019)
08 August 2024
[Pamidighantam Sri Narasimha* and Aravind Kumar, JJ.]
Issue for Consideration
The issue arising in the present appeal relates to enforcement of
an arbitral award expressed in foreign currency. In this context,
two questions arise for consideration. First, what is the correct
and appropriate date to determine the foreign exchange rate for
converting the award amount expressed in foreign currency to Indian
rupees. Second, what would be the date of such conversion, when
the award debtor deposits some amount before the court during
the pendency of proceedings challenging the award.
Headnotes†
Arbitration and Conciliation Act, 1996 - Arbitral Award -
Enforcement of an arbitral award expressed in foreign
currency - What is the correct and appropriate date to
determine the foreign exchange rate for converting the award
amount expressed in foreign currency to Indian rupees:
Held: The statutory scheme of the Act makes a foreign arbitral
award enforceable when the objections against it are finally
decided - Therefore, as per the Act and the principle in Forasol
case, the relevant date for determining the conversion rate of
foreign award expressed in foreign currency is the date when the
award becomes enforceable. [Para 20(i)]
Arbitration and Conciliation Act, 1996 - Arbitral Award -
Enforcement of an arbitral award expressed in foreign
currency - What would be the date of such conversion,
when the award debtor deposits some amount before the
court during the pendency of proceedings challenging the
award:
Held: 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
* Author
292
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security, this deposited amount must be converted as on the date
of the deposit - 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. [Para 20(ii)(iii)]
Arbitration and Conciliation Act, 1996 - Appellants are Indian
companies and the respondent is a Croatian company -
Dispute arose between the parties - Matter referred to
arbitration before the International Chamber of Commerce -
Arbitral tribunal passed its award dated 12.05.2004 in favour
of the respondent-claimant - Appellants then filed objections
against the award u/s. 48 - The appellants deposited Rs. 7.5
crores with the Executing Court on 22.10.2010 - Trial Court
dismissed the objections filed u/s. 48 - Appellants filed
a revision, which the High Court admitted by order dated
03.06.2011 - The High Court stayed the operation of the Trial
Court order dismissing objections, subject to the appellants
depositing a further amount of Rs. 50 lakhs, in addition to
Rs. 7.5 crores, with the Executing Court - The revision came
to be dismissed by the High Court on 01.07.2014, by which
the award attained finality as this order was not challenged
any further - What would be relevant conversion date of the
amount:
Held: The deposit of Rs. 7.5 crores was permitted for withdrawal by
furnishing a bank guarantee - So, the first deposit of Rs. 7.5 crores
must be converted as on the date of deposit being 22.10.2010 -
The second deposit of Rs. 50 lakhs pursuant to the High Court
order dated 03.06.2011 stands on a different footing from the first
deposit - This order did not permit the respondent to withdraw this
amount till the completion of the proceedings - Hence, the amount
cannot be converted as on the date of deposit as the respondent
could not have benefitted from the same - Here, the revision
proceedings were complete on 01.07.2014 - Thus, the second
deposit of Rs. 50 lakhs as well as the remaining amount due under
the award must be converted when the objections proceedings
attained finality on 01.07.2014 - The Executing Court, being the
Additional District Judge cum Commercial Court, must determine
the amount payable by taking into account the exchange rate as
on 01.07.2014. [Paras 11.2, 18, 19, 21]
[2024] 8 S.C.R.
293
DLF Ltd. (Formerly Known as DLF Universal Ltd) and Anr. v.
Koncar Generators and Motors Ltd.
Case Law Cited
Gurpreet Singh v. Union of India [2006] Supp. 7 SCR 422 : (2006)
8 SCC 457 - followed.
Forasol v. Oil and Natural Gas Commission [1984] 1 SCR 526 :
(1984) Supp SCC 263 - relied on.
Renusagar Power Co Ltd v. General Electric Co [1993] Supp. 3
SCR 22 : (1994) Supp 1 SCC 644; P.S.L. Ramanathan Chettiar
v. O.R.M.P.R.M [1968] 3 SCR 367; Fuerst Day Lawson v. Jindal
Exports Limited [2001] 3 SCR 479 : (2001) 6 SCC 356; United
India Insurance Co. Ltd. v. Kantika Colour Lab [2010] 6 SCR 204 :
(2010) 6 SCC 449; Meenakshi Saxena v. ECGC Limited [2018] 5
SCR 421 : (2018) 7 SCC 479; United India Insurance Co. Ltd v.
Patricia Jean Mahajan [2002] 3 SCR 1176 : (2002) 6 SCC 281;
Jiju Kuruvila v. Kunjujamma Mohan [2013] 7 SCR 276 : (2013)
9 SCC 166; Triveny Kodkany v. Air India Limited (2021) 19 SCC
214; KL Suneja v. Dr Manjeet Kaur Monga [2023] 1 SCR 1079 :
(2023) 6 SCC 722; Nepa Limited v. Manoj Kumar Agrawal [2022]
14 SCR 446 : (2022) SCC OnLine SC 1736; Delhi Development
Authority v. Bhai Sardar Singh and Sons (C.A. 3867 of 2010) -
referred to.
Progetto Grano S.P.A. v. Shri Lal Mahal Limited (2014) SCC
OnLine Del 3348; Fuerst Day Lawson v. Jindal Exports Ltd (2012)
SCC OnLine Del 5647; Trammo AG v. MMTC Limited (2019)
SCC OnLine Del 7337; Voith Hydro v. NTPC Limited (2021) SCC
OnLine Del 1325; Karamchand Thapar & Bros. (Coal Sales) Ltd.
v. MMTC Ltd. (2022) SCC OnLine Del 949 - referred to.
Jugoslavenska Oseanska Plovidba v. Castle Investment Co. Inc.
[1973] 3 All E.R. 498; In re United Railways of the Havana and
Regia Warehouses, Ltd. [1959] 1 All E.R. 214 (CA); Schorsch
Meier GmbH v. Hennin [1975] 1 All E.R. 152; Miliangos v. George
Prank (Textiles) Ltd. 1976 AC 443 - referred to.
List of Acts
Arbitration and Conciliation Act, 1996; Arbitration Act, 1940;
Foreign Exchange Regulation Act, 1973; Arbitration Act, 1950
(UK); Foreign Awards (Recognition and Enforcement) Act, 1961;
Code of Civil Procedure, 1908.
List of Keywords
Arbitration; Arbitral award; Foreign arbitral award; Enforcement of
an arbitral award expressed in foreign currency; Foreign Exchange;
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Foreign exchange rate for converting award; Date to determine the
foreign exchange rate for converting the award; Enforcement of an
arbitral award expressed in foreign currency; Relevant conversion
date of amount; Section 48 of the Arbitration and Conciliation Act,
1996; Section 17 of the Arbitration Act, 1940.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7702 of 2019
From the Judgment and Order dated 26.02.2018 of the High Court of
Punjab and Haryana at Chandigarh in CR No.1827 of 2017
Appearances for Parties
Pinaki Misra, Sr. Adv., Pravin Bahadur, Ms. Ruby Singh Ahuja, Ms.
Kritika Gomber, Ms. Akanksha Thapa, Vishnu Kant, Ms. Uzma Sheikh,
M/s. Karanjawala & Co., Advs. for the Appellants.
Abhay Mahajan, Shivam Malhotra, Manoranjan Kumar, Advs. for
the Respondent.
Judgment / Order of the Supreme Court
Judgment
Pamidighantam Sri Narasimha, J.
1.
The issue arising in the present appeal relates to enforcement of
an arbitral award expressed in foreign currency. In this context,
two questions arise for consideration. First, what is the correct and
appropriate date to determine the foreign exchange rate for converting
the award amount expressed in foreign currency to Indian rupees.
Second, what would be the date of such conversion, when the award
debtor deposits some amount before the court during the pendency
of proceedings challenging the award. Two uncertainties have a direct
bearing on the question to be answered, the time lapse between
the date of the award and its enforceability- a local factor, and the
ever-fluctuating exchange rates- a global factor.
1.1 Taking into account these two factors and the statutory
provisions, coupled with the decisions of this Court, we have
formulated twin principles: First, following the principle in Forasol
v. Oil and Natural Gas Commission,1 the date when the arbitral
1
[1984] 1 SCR 526 : 1984 Supp SCC 263
[2024] 8 S.C.R.
295
DLF Ltd. (Formerly Known as DLF Universal Ltd) and Anr. v.
Koncar Generators and Motors Ltd.
award becomes enforceable shall be the date for conversion.
Under the Arbitration and Conciliation Act, 19962 this date is
when the objections against the award are dismissed, and award
attains finality. Second, in the event that the award amount or
part of it is deposited in court pending objections, enabling
withdrawal by the decree holder, that date of such deposit
shall be the relevant date for conversion as per the principle
in Renusagar Power Co Ltd v. General Electric Co.3 Before
we consider the submissions of the counsels representing the
parties, followed by our reasons and decision, we will refer to
the relevant facts of the case.
2.
Facts: The relevant facts are that the appellants are Indian companies
and the respondent is a Croatian company. The parties entered a
contract for the design, engineering, manufacturing, and supply of
two generators by the respondent. Certain disputes arose between
them that were referred to arbitration before the International Chamber
of Commerce,4 Paris. The three-member arbitral tribunal passed its
award dated 12.05.2004 in favour of the respondent-claimant and
held the appellants to be jointly and severally liable to pay Euros
10,93,989, along with interest, as follows:
i.
Euros 9,60,308.41 with interest of 5% p.a. starting on
31.10.1999 until final repayment;
ii.
Euros 18,411.40 for the storage and maintenance of the
goods with interest of 5% p.a. starting from the date of
the award;
iii.
Euros 5,545.40 relating to lawyer expenses of the claimant,
euros 99,482.70 relating to arbitration fees paid to the
ICC, euros 3,389.57 as guaranty expenses relating to the
repayment of the appellants' arbitration fee to the ICC,
euros 6,852 relating to the arbitration costs in Paris, all
these amounts with interest of 5% p.a. from the date of
the award.
2
Hereinafter 'the Act'.
3
[1993] Supp. 3 SCR 22 : 1994 Supp (1) SCC 644
4
Hereinafter "ICC".
296
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2.1 The respondent filed for execution of the award in 2004, while
the appellants filed a petition under Section 34 of the Act,
which was dismissed on 28.04.2010. In 2010, the appellants
then filed objections against the award under Section 48 of the
Act and also filed a Section 37 appeal against the Section 34
order. The High Court dismissed the appeal by its order dated
15.10.2010, the terms of which are important for our purpose
and are hence extracted:
"After arguing for some time learned counsel have
reached a consensus on the present appeal. It has
been agreed by learned counsel for the appellants
that the appeal as well as the application under
Section 34 of the Arbitration and Conciliation Act,
1996 would be dismissed as withdrawn. It has been
further agreed that the appellants would deposit an
amount of Rs.7.5 Crores before the Executing Court
on or before 08.11.2010.
It has been agreed by learned counsel for the
respondent that the application under Section 48
which has been filed by the appellants would be
decided on its own merits without being influenced
by any findings or observations in the order on the
application under Section 34 dated 28.04.2010. It
has further been agreed by learned counsel for the
respondent that the amount of Rs. 7.5 Crores which
would be deposited by the appellants would be
released to it only consequent to furnishing a bank
guarantee of a scheduled bank of India in the amount
of Rs. 7.5 Crores in favour of the Executing Court and
the said bank guarantee would be kept alive during
the proceedings under Section 48 and for a period
of 60 days thereafter. The final order thereon would
obviously be passed by the Executing Court after
the conclusion of the proceedings under Section 48."
2.2 In accordance with the above, the appellants deposited
Rs. 7.5 crores with the Executing Court on 22.10.2010.
2.3 The Trial Court dismissed the objections filed under
Section 48 by order dated 02.04.2011. The appellants filed
[2024] 8 S.C.R.
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DLF Ltd. (Formerly Known as DLF Universal Ltd) and Anr. v.
Koncar Generators and Motors Ltd.
a revision, which the High Court admitted by order dated
03.06.2011. By this order, the High Court also stayed the
operation of the Trial Court order dismissing objections, subject
to the appellants depositing a further amount of Rs. 50 lakhs, in
addition to Rs. 7.5 crores, with the Executing Court. The Court
directed that the amount shall be disbursed to the successful
party on the final adjudication of this lis. It also rejected
the respondent's prayer for deposit of the amount in euros.
Pursuant to this order, the appellants deposited Rs. 50 lakhs on
15.07.2011. Subsequently, the revision came to be dismissed
by the High Court on 01.07.2014, by which the award attained
finality as this order was not challenged any further.
2.4 In the execution proceedings, the Trial Court by order dated
24.08.2016 permitted the respondent to withdraw the entire
deposit of Rs. 8 crores as per the direction of the High Court.
On 10.10.2016, the respondent received Rs. 11,60,12,100,
including the interest that had accrued on the deposited amount.
2.5 The execution petition was allowed by the Trial Court by its
order dated 03.02.2017, wherein it was held that the relevant
date to convert the award amount expressed in euros to Indian
rupees (the foreign exchange rate) is 01.07.2014, i.e., the
date on which all the objections against the award were finally
decided as it is only on such date that the award is deemed
to be a decree. The Trial Court accepted the calculation as
submitted by the respondent.
2.6 The appellants filed a revision petition against this order, which
was dismissed by the High Court by order dated 26.02.2018,5
which is impugned herein. The High Court rejected the
appellant's reliance on this Court's decision in Forasol (supra) to
submit that the date of decree shall be deemed as the relevant
date for conversion and since the award dated 12.05.2004 is
a deemed decree under the Act, the exchange rate as on the
date of the award should be applied. The Court reasoned that
this Court's judgment in Forasol (supra) was passed under the
Arbitration Act, 1940 and hence, does not apply in the present
case. Instead, the High Court referred to the Delhi High Court's
5
In CR No. 1827 of 2017 (O&M), Punjab and Haryana High Court (hereinafter "impugned judgment").
298
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decision in Progetto Grano S.P.A. v. Shri Lal Mahal Limited,6
against which this Court dismissed the SLP,7 where it was held
that the relevant date for conversion is when the objections filed
under Section 48 are finally decided. Further, the Court referred
to Section 49 of the Act8 that provides that the foreign arbitral
award shall be deemed to be a decree of the court when it is
satisfied that it is enforceable under Part II, Chapter I of the
Act. It reasoned that such satisfaction required under Section
49 is complete only when the objections filed under Section
48 are finally decided, which was on 01.07.2014 in the present
case (when the High Court dismissed the revision). It also
observed that the appellants delayed execution of the award
by initially filing under Section 34, despite such application
not being maintainable and then filing an appeal against this
order and subsequently withdrawing it. The appellants cannot
be permitted to benefit from the fluctuation in exchange rates
when the delay is attributable to them. Therefore, the relevant
date for conversion is 01.07.2014.
2.7 While issuing notice on the special leave petition filed by the
appellant on 10.09.2018,9 this Court confined the issue to
determining whether the foreign exchange rate as on 15.10.2010
would apply to the deposit of Rs. 8 crores.
3.
Submissions: Learned senior counsel Mr. Pinaki Mishra appeared
on behalf of the appellants. Initially, he submitted that 01.07.2014
would not be the relevant date for conversion for the entire amount
and argued for using the exchange rate on 02.04.2011, when the
Trial Court dismissed objections under Section 48. However, he
later restricted his submissions to the exchange rate that applies
when the amount of Rs. 8 crores was deposited by the appellants
on 22.10.2010 as per the order dated 15.10.2010. The crux of his
argument is that the deposited amount stands converted as on the
6
2014 SCC OnLine Del 3348
7
SLP No. 27041/2014, order dated 21.11.2014.
8
Section 49 of the Act reads:
"49. Enforcement of foreign awards.-Where the Court is satisfied that the foreign award is enforceable
under this Chapter, the award shall be deemed to be a decree of that Court."
9
By order 10.09.2018, this Court ordered: "Issue notice, returnable within four weeks, limited to the
conversion rate that would be applicable on 15.10.2010 insofar as the deposit of Rs. 7.5 Crores is
concerned. The same will apply to the further deposit of Rs. 50,00,000/-."
[2024] 8 S.C.R.
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DLF Ltd. (Formerly Known as DLF Universal Ltd) and Anr. v.
Koncar Generators and Motors Ltd.
date of its deposit, and this amount then cannot be converted again
as per the exchange rate prevailing on 01.07.2014. He has submitted
that the High Court passed an order dated 15.10.2010 directing the
appellants to deposit Rs. 7.5 crores on the consent of both parties, and
also permitted the respondent to withdraw this amount on furnishing
a bank guarantee in Indian rupee for the entire amount, to which
the respondent had agreed at the time. He further submitted that
the appellants cannot be faulted for the respondent not withdrawing
the amount when it was deposited. In response to the respondent's
contention regarding their inability to furnish a bank guarantee of a
scheduled Indian bank, he submitted that the respondent had agreed
to this condition when the order was passed, and in any case, it
could have applied for a modification but did not do so. Since the
respondent consented to the deposit of Rs. 7.5 crores and it was
also permitted to withdraw the same, the amount stood converted
as on the date of its deposit on 22.10.2010. The exchange rate on
this date was 1 euro = Rs. 59.17. While the arbitral award along
with interest was euros 16,73,469.07, the deposited amount of Rs.
7.5 crores gets converted to euros 12,67,534.22 at that exchange
rate, and the balance of the award would be euros 4,05,934.85 that
remained pending as on this date. Subsequently, pursuant to the
High Court's interim order dated 03.06.2011 in revision against the
Trial Court dismissing the objections petition, the appellant deposited
an additional amount of Rs. 50 lakhs on 15.07.2011. As on this date,
the amount of arbitral award including interest pending payment was
euros 4,17,278.78, i.e., after converting and adjusting the earlier
deposit against the award. Using the prevailing exchange rate of 1
euro = Rs. 62.89 as on 15.07.2011, the appellant's deposit amounts
to euros 79,503.90. Therefore, a balance of euros 3,37,774.88, along
with interest, remains pending for which the exchange rate as on
01.07.2014 would apply.
3.1 Mr. Mishra concluded by submitting that the appellants would
be required to pay only Rs. 3.19 crores if their calculation is
accepted. On the other hand, if the impugned judgment is
upheld, they would be required to be pay more than double
the amount, i.e., Rs. 6.48 crores.
3.2 Mr. Abhay Mahajan, learned counsel, appearing for the
respondent submitted that the exchange rate on 01.07.2014
would apply to the entire award amount. He submitted that
the respondent had not consented to the deposit of Rs. 7.5
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crores and that the High Court did not convert the amount but
only directed deposit of a lump sum amount. He relied on this
Court's decision in P.S.L. Ramanathan Chettiar v. O.R.M.P.R.M.
Ramanathan Chettiar10 where it was held that the judgment
debtor depositing a sum in court during the pendency of the
appeal does not pass the title and vest the money with the
decree-holder. The decree-holder may withdraw the amount
only on furnishing security, which means that the payment is
not in satisfaction of the decree. Further, the judgment debtor
can proceed against the security in case he succeeds in the
appeal. Rather, the purpose of the deposit is to obtain a stay
of execution and to put the money beyond the reach of the
parties pending the disposal of the appeal. On this basis, Mr.
Mahajan submitted that the deposit of Rs. 8 crores during the
pendency of the objections under Section 48 does not pass the
title of this amount to the respondent and such deposit was not
under the arbitral award as the award can be deemed to be a
decree only on 01.07.2014 when all the objections to the award
stood dismissed. Hence, this is the relevant date for conversion.
3.3 As per the calculation sheet submitted by the respondent,
the exchange rate as on this date is 1 euro = Rs. 82.21 and
this rate must be used for converting the entire arbitral award
and interest. The amount of Rs. 11.6 crores withdrawn by the
respondent on 10.10.2016 must first be appropriated towards
interest and then towards the principal sum. After adjusting
this amount and after accounting for interest, the respondent
submits that it is entitled to Rs. 6,57,62,057 from the appellants.
4.
Analysis - Statutory Scheme: It is important to first set out the
statutory scheme for the enforcement of foreign arbitral awards in
India. Under the Act, Part II deals with the enforcement of certain
foreign arbitral awards. Chapter I deals with awards under the New
York Convention. Section 45 provides for the power of a court to
refer parties to arbitration.11 Section 46 provides that a foreign award
10
[1968] 3 SCR 367
11
Section 45 reads:
"45. Power of judicial authority to refer parties to arbitration.-Notwithstanding anything contained
in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action
in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the
request of one of the parties or any person claiming through or under him, refer the parties to arbitration,
[2024] 8 S.C.R.
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DLF Ltd. (Formerly Known as DLF Universal Ltd) and Anr. v.
Koncar Generators and Motors Ltd.
which is enforceable under this Chapter shall be treated as binding
for all purposes on the persons between whom it is made.12 Section
47 provides for the evidentiary requirements for enforcement of a
foreign award.13 Section 48 sets out various grounds on which the
court may refuse the enforcement of a foreign award.14 Section 49
[unless it prima facie finds] that the said agreement is null and void, inoperative or incapable of being
performed."
12
Section 46 reads:
"46. When foreign award binding.-Any foreign award which would be enforceable under this Chapter
shall be treated as binding for all purposes on the persons as between whom it was made, and may
accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal
proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed
as including references to relying on an award."
13
Section 47 reads:
"47. Evidence.-(1) The party applying for the enforcement of a foreign award shall, at the time of the
application, produce before the court-
(a) the original award or a copy thereof, duly authenticated in the manner required by the law of the
country in which it was made;
(b) the original agreement for arbitration or a duly certified copy thereof; and
(c) such evidence as may be necessary to prove that the award is a foreign award.
(2) If the award or agreement to be produced under sub-section (1) is in a foreign language, the party
seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic
or consular agent of the country to which that party belongs or certified as correct in such other manner
as may be sufficient according to the law in force in India.
[Explanation.-In this section and in the sections following in this Chapter, "Court" means the High Court
having original jurisdiction to decide the questions forming the subject-matter of the arbitral award if the
same had been the subject-matter of a suit on its original civil jurisdiction and in other cases, in the High
Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.]"
14
Section 48 reads:
"48. Conditions for enforcement of foreign awards.-(1) Enforcement of a foreign award may be
refused, at the request of the party against whom it is invoked, only if that party furnishes to the court
proof that-
(a) the parties to the agreement referred to in section 44 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
(b) the party against whom the award is invoked was not given proper notice of the appointment of the
arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(c) the award deals with a difference not contemplated by or not falling within the terms of the submission
to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so
submitted, that part of the award which contains decisions on matters submitted to arbitration may be
enforced; or
(d) 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
(e) 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.
(2) Enforcement of an arbitral award may also be refused if the Court finds that-
(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India;
or
(b) the enforcement of the award would be contrary to the public policy of India.
[Explanation 1.-For the avoidance of any doubt, it is clarified that an award is in conflict with the public
policy of India, only if,-
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section
75 or section 81; or
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provides that where the court is satisfied that a foreign award is
enforceable under this Chapter, it shall be deemed to be a decree
of that court. Section 50 provides for appeal against certain orders,
i.e., orders refusing to refer parties to arbitration under Section 45
and orders refusing to enforce a foreign award under Section 48.15
Finally, Section 5116 is a savings clause and Section 5217 provides
that Chapter II of Part II shall not apply to awards governed under
this Chapter.
4.1 From the statutory scheme, it is clear that a foreign arbitral award
is binding between the parties when it is enforceable under
Part II, Chapter I of the Act (Section 46). The enforceability of
the award can be challenged under Section 48, and the order
passed on such an application can be appealed under Section
50 only if it is allowed and the court refuses enforcement of
the award. Therefore, a foreign award can be enforced when
the objections against it are finally decided and dismissed. At
this point, the award is deemed to be a decree of the court as
per Section 49.18 Unlike under the Arbitration Act, 1940, there
is no requirement for a separate decree by a court for making
the award a rule of the court.19
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice. ]
[Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the
fundamental policy of Indian law shall not entail a review on the merits of the dispute.]
(3) If an application for the setting aside or suspension of the award has been made to a competent
authority referred to in clause (e) of sub-section (1) the Court may, if it considers it 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 give suitable security."
15
Section 50 reads:
"50. Appealable orders.-(1) [Notwithstanding anything contained in any other law for the time being in
force, an appeal] shall lie from the order refusing to-
(a) refer the parties to arbitration under section 45;
(b) enforce a foreign award under section 48, to the court authorised by law to hear appeals from such
order.
(2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this
section shall affect or take away any right to appeal to the Supreme Court."
16
Section 51 reads:
"51. Saving.-Nothing in this Chapter shall prejudice any rights which any person would have had of
enforcing in India of any award or of availing himself in India of any award if this Chapter had not been
enacted."
17
Section 52 reads:
"52. Chapter II not to apply.-Chapter II of this Part shall not apply in relation to foreign awards to which
this Chapter applies."
18
See Fuerst Day Lawson v. Jindal Exports Limited (2001) 6 SCC 356, paras 30 and 31.
19
ibid.
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5.
Case-law on Relevant Date for Conversion: Now, we will discuss
the case-law on the relevant date of conversion, both in the context
of arbitral awards and judgments where the decretal amount is
expressed in a foreign currency. The seminal case that first decided
this question was Forasol v. ONGC (supra). Forasol was a French
company that was awarded a tender for structural drilling of oil
for exploration by ONGC. Pursuant to certain disputes that arose
between the parties, the matter was referred to arbitration and on
21.12.1974, an arbitral award was passed in Forasol's favour where
the amount was expressed in French francs. This award was made
under the Arbitration Act, 1940. The Court held that the award can be
enforced either in foreign currency or in Indian rupee. The principles
for determining conversion to Indian rupee are as follows:
5.1 Where the contract provides for a rate of exchange, the same
must be used to convert the amount in accordance with the
wording of the contractual clause. In this case, article IX-3.1
of the contract provided for the exchange rate of FF 1.033 =
Re. 1.000, which the Court held as applying to only 20% of
the fees and charges computed in French francs based on
contractual interpretation.20 Further, the arbitral award provided
for an enhanced rate of conversion of FF 1.000 = Rs. 1.5178 as
applicable to payments in Indian rupee on or after 30.11.1966
as the Indian rupee was depreciated at this time. The Court
interpreted the arbitral award and held this exchange rate to
apply in place of what was provided in article IX-3.1 to the extent
of payments made in Indian rupee on and after 30.11.1966.21
5.2 For the remaining amount that still required to be converted to
Indian rupee for which no exchange rate was provided in the
contract or the arbitral award, the Court considered six possible
dates as the proper date for fixing the rate of exchange22:
i.
the date when the amount became due and payable;
ii.
the date of the commencement of the action;
iii.
the date of the decree;
20
Forasol (supra), para 16.
21
ibid, paras 17-22.
22
ibid, paras 24-2 5.
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iv.
the date when the court orders execution to issue;
v.
the date when the decretal amount is paid or realised;
vi.
and in cases where a decree is passed by the court in
terms of an arbitral award in foreign currency, the date
of the award.
5.3 After an extensive discussion of English jurisprudence on the
point, the Court noted the position of law in England at the
time.23 Briefly stated, the position is as follows: Both courts
and arbitrators in England have the jurisdiction to make a
judgment/ award in foreign currency in certain circumstances.
In the Jugoslavenska case,24 the Court of Appeal held that in
cases of arbitral awards, the date of award is the relevant date
for determining the exchange rate. This was a departure from
the 'breach date rule', i.e., the conversion must be as per the
exchange rate on the date when the debt was payable, which
principle was laid down by the House of Lords in the Havana
case.25 Subsequently, in the Schorsch Meier case26 (this was
not a case of arbitration but a claim for payment of price of
goods in a foreign currency filed before English courts), the
Court of Appeal held that the date of conversion should be the
date of payment, i.e., the date on which the court authorises
enforcement of the judgment in terms of sterling. Finally, in the
Miliangos case,27 the House of Lords also held that the date
of conversion should be the date when the court authorises
enforcement of the judgment in terms of sterling pound. While
Jugoslavenska (supra) was not expressly overruled by the
House of Lords, its correctness was doubted.
5.4 The Court held that there is no bar on courts in India to pass
a decree for a sum expressed in foreign currency. However,
for the purpose of payment of such amount, the limitations and
restrictions under the Foreign Exchange Regulation Act, 1973
(that was in force at the time) must be considered. If permission
23
ibid, para 39.
24
Jugoslavenska Oseanska Plovidba v. Castle Investment Co. Inc., [1973] 3 All E.R. 498.
25
In re United Railways of the Havana and Regia Warehouses, Ltd.,[1959] 1 All E.R. 214 (CA).
26
Schorsch Meier GmbH v. Hennin, [1975] 1 All E.R. 152
27
Miliangos v. George Prank (Textiles) Ltd., 1976 AC 443.
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is not granted by the authorities to pay the decretal amount in
foreign currency, the amount would have to be converted to
Indian rupees for payment of an equivalent amount. The date
of conversion becomes relevant here, as the "court must select
a date which puts the plaintiff in the same position in which he
would have been had the defendant discharged his obligation
when he ought to have done, bearing in mind that the rate of
exchange is not a constant factor but fluctuates, and very often
violently fluctuates, from time to time."28 These are the guiding
principles and considerations for the Court to determine the
relevant date, which are apposite even today.
5.5 The Court then undertook a detailed examination of each of
the 6 dates that it set out earlier and held that the date of the
decree (the third option) is the most appropriate amongst them.
The Court adopted the approach of eliminating other possible
dates, on the following grounds:
i.
The date when the amount becomes due and payable
does not have the same effect of putting the plaintiff in the
same position that he would have been in if the defendant
had discharged his obligation. Due to the fluctuations in
exchange rate, using this date could result in the decreeholder only receiving a fraction of or a lot more than what
he is entitled to.29
ii.
The second date - when the action or suit commenced -
was rejected for the same reason as above, considering
that there is usually a large period of time between the
filing of the suit, the decree by the Trial Court, subsequent
appeals, revisions, and reviews, and the final decision.30
iii.
The Court favourably discussed the third option, i.e., the
date of the decree or judgment. It held that the decree
crystallises the amount payable to the decree-holder. To
account for appeals and revisions, the date when the action
is finally disposed of and when the decree becomes final
28
Forasol (supra), para 40.
29
ibid, para 41.
30
ibid, para 42.
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and binding on both parties, after exhausting all remedies,
can be used. However, it observed that the only objection to
be considered against this date is that there is a significant
lapse of time between the decree and its execution.31
iv.
The Court rejected the fourth date, i.e., the date of court
order for execution, despite the same being used in English
law as per the decision in Miliangos (supra). It noted that
the process of execution in India is a lengthy one that may
require attachment of property, deciding third party claims
to such property, proclamation with particulars, and auction
sale. Moreover, multiple applications for execution may be
required if the initial attachment and sale does not cover
the decretal amount. Hence, it may lead to a situation
where there are multiple execution orders, meaning multiple
exchange rates would have to be considered. Another
difficulty is that the execution application itself requires
the amount to be expressed in Indian currency.32
v.
The date of payment was also rejected as the proper date
due to practical and procedural difficulties of having to pay
court fees on a determined amount in Indian rupee; the
pecuniary limit of the jurisdiction of courts would depend
on the amount claimed, which must again be in Indian
rupee; and execution is for a specific sum expressed in
Indian rupee. For these reasons, the Court held that the
conversion of the amount to the domestic currency cannot
be left to the date of payment as the legal procedures in
India require the amount to be determined in domestic
currency before that.33
vi.
Among the remaining dates, the Court was of the
opinion that the date of the judgment/decree is the most
appropriate.34 It rejected the date of the arbitral award as
the proper date while observing that the Jugoslavenska
case (supra), where this date was used, was doubted even
31
ibid, para 43.
32
ibid, paras 44-46.
33
ibid, paras 47-52.
34
ibid, para 53.
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by the House of Lords in Miliangos (supra). If the law laid
down in Miliangos (supra) were to be applied to arbitral
awards, the date of conversion would be when the court
grants leave under Section 26(1) of the Arbitration Act,
1950 (UK) to enforce such award in the same manner
as a judgment or to the same effect.35 Further, noting the
differences between the statutory scheme for enforcement
of foreign arbitral awards in the UK and in India, it held
that the Jugoslavenska case (supra) will not apply in the
Indian context considering the procedure under Section 17
is different from the procedure under English law.36 Section
17 of the Arbitration Act, 194037 required a judgment and
decree to give an award the status of a decree, i.e., making
it a rule of court, for the award to become enforceable. On
the other hand, English law38 did not require a judgment to
be passed in all cases and it was sufficient for the court
to grant leave to enforce the award in the same manner
as a judgment.