LI Network
Published on: October 12, 2023 at 12:44 IST
The Supreme Court of India addressed a critical issue related to the conversion of awarded sums from US Dollars to Indian Rupees in arbitration agreements.
The Court’s decision has significant implications for cases where no provision for payment in Indian Rupees (INR) exists in the agreement.
The case in question involved two appeals filed before the High Court of Delhi, under Article 134A read with Article 133(1)(a) of the Constitution of India.
The central question revolved around the relevant date for converting the awarded sum from USD to Indian Rupees, as specified in an agreement dated June 29, 1982, between the parties.
A two-judge Bench comprising Justice Aniruddha Bose and Justice Vikram Nath delivered the ruling, stating that the absence of a provision for payment in Indian Rupees in the agreement negates the need to determine a conversion date for US Dollars to Indian Rupees.
The parties had originally entered into an agreement in 1982 for earthwork in Iraq, specifying payments in Iraqi Dinars and US Dollars. An arbitration award in 2002 was given in Iraqi Dinars, leading to disputes regarding the conversion date of the awarded sum to Indian Rupees.
The High Court and the Supreme Court had differing opinions on this matter. The Supreme Court, in its judgment dated February 24, 2015, clarified that the date of conversion should align with the original agreement, emphasizing that the High Court’s changes to the conversion date and interest rate were unjustified.
The Court’s decision reinforced that the arbitrator’s directions should align with the terms of the original agreement, ensuring that the conversion of currency should adhere to the agreement’s specifications. Senior Advocate Dhruv Mehta represented the parties in this legal dispute.
Upon examining the agreement, the Court noted that it only allowed payments in Iraqi Dinars and US Dollars, with specified conversion rates. The award, too, specified payments in Iraqi Dinars and US Dollars and did not permit conversion to INR, except for the encashed bank guarantee amount of Rs. 20 lakhs.
The Court concluded that the award amount could only be converted into US Dollars, and no conversion to Indian Rupees was permissible.
Consequently, there was no requirement to determine a conversion date for US Dollars to Indian Rupees. Payments must be made in foreign currency (Iraqi Dinars and US Dollars) along with computed interest. While the parties could agree on INR conversion rates, the Court upheld the terms of the agreement, award, and the Supreme Court’s directions.
Both appeals were disposed of, allowing Royal Construction Company Private Ltd. (RCCPL) to proceed with execution proceedings as per the law.
Case Title: National Projects Construction Corporation Limited v. Royal Construction Company Private Ltd.