IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION APPEAL APPEAL APPEAL NO. 28 OF 2002 NO. 28 OF 2002 NO. 28 OF 2002 IN IN IN CHAMBER CHAMBER CHAMBER SUMMONS NO. 298 OF 2001 SUMMONS NO. 298 OF 2001 SUMMONS NO. 298 OF 2001 IN IN IN ARBITRATION ARBITRATION ARBITRATION PETITION NO. 65 OF 1988 PETITION NO. 65 OF 1988 PETITION NO. 65 OF 1988 IN IN IN AWARD AWARD AWARD NO. 43 OF 1988 NO. 43 OF 1988 NO. 43 OF 1988 OIL & NATURAL GAS COMMISSION, ] Bombay Offshore Project, O.N.G.C., ] .. Appellants 12th Floor, Express Towers, ] (Original Nariman Point, Bombay - 400 021. ] Respondents) Versus M/S. MCCELLAND ENGINEERS S.A. ] 6100, Hillcroft, Houston ] .. Respondents Texas 77081, U.S.A. ](Ori.Claimants) Mr. D.D. Madon, senior counsel with Mr. S.A. Bhalwal i/b M/s. Vyas & Bhalwal for the appellants. Mr. R.V. Govilkar with Mr. G.S. Pikale i/b M/s. S.V. Pikale & Co. for the respondents. CORAM: R.M. LODHA, & S.A. BOBDE, JJ. DATED: 20TH/21ST NOVEMBER, 2006 ORAL JUDGMENT : [Per R.M. Lodha, J.] . In the contract given by the appellants to the respondents pertaining to design and execution of fixed platforms and other installations in the Bombay Offshore on the West and East coast for the field season 1980-81, the dispute arose between the parties. The respondent : 2 : claimed the amount for extra work and interest for delayed payment. For the sake of convenience, we shall refer the respondents as "the claimants" and the appellants as "the ONGC" hereinafter. 2. The dispute was referred to the arbitrators who passed an Award on 29th February, 1988, directing the ONGC to pay to the claimants: 1) US $ 1,804.50 being interest on US $ 40,102.97 at 12% p.a. from 1/12/1985 to 16/4/1086 and 2) US $ 59,593 being interest on US $ 3,12,011.50 at 12% p.a. from 3/5/1983 to 5/11/1984. The interest on the amount as per the Award was awarded at 12% p.a. from the date of the Award till realisation. 3. The ONGC petitioned for setting aside the Award by filing Arbitration Petition No.65 of 1988 before this Court. 4. The Arbitration Petition No.65 of 1988 came to be rejected by the learned single Judge on 9th August, 1988. 5. The appeal was carried at the instance of the ONGC to the Division Bench unsuccessfully as the said appeal was dismissed by the Division Bench on 25th : 3 : October, 1988. 6. Dissatisfied with the order of the Division Bench dated 25th October, 1988 dismissing the appeal from the order of the learned single Judge dated 9th August, 1988 refusing to set aside the award, the ONGC filed Special Leave Petition before the Supreme Court of India on 24th February, 1989. 7. The Supreme Court granted leave on 5th March, 1991 and rejected the application for grant of stay. The order dated 5th March, 1991 passed by the Supreme Court reads thus: "The Application for grant of stay is rejected. Special Leave granted. The appellant will deposit the amount in compliance with the Award but the respondent will not be permitted to withdraw the amount of future interest allowed @ 12% p.a. by the Arbitrator from the date of the Award till deposit. The said amount will be placed in a long term fixed deposit with any scheduled bank in the name of the Registrar of the High Court of Bombay. The amount will be deposited within six weeks from today. So far as the remaining amount is concerned, the respondent will be entitled to withdraw the same on their filing an undertaking in the Bombay High Court to deposit the same with interest @ 12% p.a. in the event the appellant succeeds this appeal and if they are found not liable to pay the same." : 4 : 8. It is pertinent to notice here that before the aforesaid order dated 5th March, 1991 came to be passed by the Supreme Court, in the absence of any stay order, the learned single Judge on 25th April, 1989 passed the Jugment/decree in terms of the award. The said decree reads thus: "UPON HEARING Shri G.S. Pikale of M/s. S.V. Pikale & Co., Advocates for the Claimants abovenamed, who this day on the Notice of Motion No.769 of 1989 dated 27th day of March, 1989 applies for a Decree in terms of the Award herein dated 26th day of February, 1988 filed in this Hon’ble Court on the 9th day of March, 1988 AND UPON HEARING Shri Nihar A. Ghag of M/s. Parimal K. Shroff & Co., Advocates for the Respondents AND UPON READING the said Notice of Motion and the Affidavit of Bramlette McClelland, Senior Chairman of McClelland Engineers, S.A., the Claimants, sworn on the 15th day of March, 1989 in support thereof and the said Award AND UPON READING the Certificate of the Prothonotary & Senior Master of this Hon’ble Court dated 22nd day of February, 1989 certifying that Arbitration Petition No.65 of 1988 filed by the Respondents in this Hon’ble Court to set aside the said Award No.43 of 1988 has been dismissed pursuant to the order made by Hon’ble Shri Justice Pendse on the 19th day of August, 1988 AND that the Petitioners in the said Arbitration Petition No.65 of 1988 preferred an Appeal against the said order dated 19th day of August, 1988 bearing Appeal No.1253 of 1988 and that the said Appeal No.1253 of 1988 has been dismissed pursuant to the Appellate Court’s order dated the 25th day of October, 1988 AND that save and except the aforesaid Arbitration Petition No.65 of 1988 and Appeal No.1253 of 1988 no other application has been made to this Hon’ble Court to set aside or : 5 : remit the said Award No.43 of 1988, THIS HONOURABLE COURT DOTH PASS JUDGMENT in favour of the CLAIMANTS AND DOTH ORDER AND DECREE THAT the Respondents DO PAY to the claimants U.S. $ 1,804.50 (U.S. Dollars One thousand eight hundred and four and cents fifty only) equivalent to Rs.28,734.07 (Rupees Twentyeight thousand seven hundred thirtyfour and paise seven only) (i) being interest on U.S. $ 40,102.97 (U.S. Dollars Forty thousand one hundred two and cents ninetyseven only) at 12% per annum from 1.12.1985 to 146.4.1986 AND U.S. $ 59,593.00 (U.S. Dollars Fiftynine thousand five hundred and ninetythree only) equivalent to Rs.9,48,933.06 (Rupees Nine lakhs fortyeight thousand nine hundred thirtythree and paise six only) (2) being interest on U.S. $ 3,12,011.00 (U.S. Dollars Three lakhs twelve thousand and eleven only) at 12% per annum from 3.5.1983 to 5.11.1984 and U.S. $ 8,558.65 (U.S. Dollars Eight thousand five hundred fiftyeight and cents sixtyfive only) equivalent to Rs.1,36,284.82 (Rupees One lakh thirtysix thousand two hundred eightyfour and paise eightytwo only) towards the interest at the rate of 12% per annum on the aforesaid amount from the date of Award till the date hereof aggregating to U.S. $ 69,956.15 (U.S. Dollars Sixtynine thousand nine hundred fiftysix and cents fifteen only) equivalent to Rs.11,13,951.35 (Rupees Eleven lakhs thirteen thousand nine hundred fiftyone and paise thirtyfive only) AND DO PAY further interest on the said sum of U.S. $ 61,397.50 (U.S. Dollars Sixtyone thousand three hundred ninetyseven and cents fifty only) equivalent to Rs.9,77,667.13 (Rupees Nine lakhs seventyseven thousand six hundred sixtyseven and paise thirteen only) at the rate of 12% per annum from the date hereof till payment AND THIS COURT DOTH FURTHER ORDER THAT Respondents do pay Rs.155.00 (Rupees One hundred fiftyfive only) to the Claimants being cost of this Notice of Motion." 9. It would be, thus, seen that in the decree : 6 : passed by the learned single Judge in terms of the Award, the decretal amount in US dollars and the interest thereon was converted into Indian rupees. 10. Since the decree had already been passed in terms of the award by the learned single Judge on 25th April, 1989 and that by the order dated 5th March, 1991 the Supreme Court had rejected the application for grant of stay and directed the ONGC to deposit the amount in compliance with the award within six weeks therefrom, the respondents deposited on 11th August, 1992, though not within the time granted by the Supreme Court, US $ 61,379 with the Prothonotary & Senior Master of this Court. 11. The Supreme Court, ultimately, by the order dated 23rd April, 1999, dismissed the appeal preferred by the ONGC. It was held that the Division Bench was justified in dismissing the appeal against the order of the learned single Judge refusing to set aside the award. 12. It is the ONGC’s case that on 22nd June, 2000 a demand draft No.595821 dated 4th April, 2000 for US $ 32,481.78 issued by State Bank of India, Backbay Reclamation and drawn in favour of the Office of the : 7 : Prothonotary & Senior Master, High Court, Bombay to the account of the claimant was deposited alongwith Cheque No.143950 dated 6th April, 2000 for Rs.155/- drawn on State Bank of India, Cuffe Parade Branch, Mumbai and the Prothonotary & Senior Master was requested to record the decree satisfied, but the Office of the Prothonotary & Senior Master, High Court, Bombay, on 25th September, 2000 refused to accept the demand draft of US $ 32,481.78 as, according to the Prothonotary & Senior Master, the said amount was required to be deposited in the year 1991 as per the order of the Supreme Court dated 5th March, 1991. 13. To complete the narration of facts, it needs to be stated here that after the appeal filed by the ONGC came to be dismissed by the Supreme Court on 23rd April, 1999, the claimants made an Interim Application No.5 of 2000 before the Supreme Court on 23rd November, 2000 praying therein that the judgment and order dated 23rd April, 1999 be clarified and the ONGC be directed to pay to the claimants, the amount awarded/decreed at the exchange rate i.e. Rs.42.87 per dollar being the foreign exchange rate as on the date of the final order dated 23rd April, 1999 passed by the Supreme Court. 14. The Supreme Court dismissed the Interim : 8 : Application No.5 of 2000 on 29th January, 2001. That order says this: "No clarification is required to be made. I.A.No.5 is accordingly dismissed." 15. After dismissal of Interim Application No.5 of 2000 by the Supreme Court holding that no clarification was necessary in the order dated 23rd April, 1999, the claimants took out Chamber Summons in the Arbitration Petition before the learned single Judge of this Court praying for the following relief: "(a) That this Hon’ble Court may be pleased to clarify and direct the Respondents to pay to the Claimants the amount awarded decreed at the exchange rate i.e. Rs.42.87 per dollar being the foreign exchange rate as on the date of the final order dated 23.4.1999 passed by the Hon’ble Supreme Court of India." 16. The Chamber Summons was opposed by the ONGC. However, after hearing the parties, the learned Chamber Judge granted the Chamber Summons in terms of prayer clause (a) as aforenoticed on September 10, 2001. 17. Aggrieved thereby, the ONGC is in Appeal. : 9 : 18. We heard Mr. D.D. Madon, the senior counsel for the ONGC and Mr. R.V. Govilkar, the counsel for the claimants at quite some length. 19. In Forasol Vs. Oil & Natural Gas Commission, Forasol Vs. Oil & Natural Gas Commission, Forasol Vs. Oil & Natural Gas Commission, AIR AIR AIR 1984 SC 241 1984 SC 241 1984 SC 241, the Supreme Court was concerned with the selection of date by the Court as the proper date for fixing the rate of exchange to which the foreign currency amount has to be converted into the Indian currency as the action was commenced and decided in India. 20. Paragraphs 24, 25, 41, 70 and 71 which are relevant may be reproduced as it is. "24. In an action to recover an amount payable in a foreign currency, five dates compete for selection by the Court as the proper date for fixing the rate of exchange at which the foreign currency amount has to be converted into the currency of the country in which the action has been commenced and decided. These dates are: (1) the date when the amount became 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 realized. 25. In a case where a decree has been passed by the court in terms of an award made in a foreign currency a sixth date also enters the competition, namely, the date of the award. The case before us is one in which a decree in terms of such an award has : 10 : been passed by the court. ................. ................. 41. The first of the five dates listed earlier by us, namely, the date when the amount became due and payable, does not have the effect of putting the plaintiff in the same position in which he would have been had the defendant discharged his obligation when he should have done because between that date and the fate when the suit is decreed the rate of exchange may have fluctuated to the plaintiff’s prejudice, resulting in the amount decreed in rupees representing only a fraction of what he was entitled to receive. Equally, the possibility of the plaintiff getting more than what he had bargained for in case the rate of exchange had fluctuated in his favour cannot be ruled out. To select, as the English courts had done earlier, the date when the amount became due or the "breach date", as the English courts have termed it, is thus to expose the parties to the unforseeable changes in the international monetary market. The selection of the "breach date" cannot, therefore, be said to be just, fair and equitable because in a case where the rate of exchange has gone against the plaintiff, the defendant escapes by paying a lesser sum than what he was bound to and thus is the gainer by his default while in converse case where the rate of exchange has gone against the defendant, the defendant would be subjected to a much greater burden than what he should be. ................. ................. 70. It would be convenient if we now set out the practice, which according to us, ought to be followed in suits in which a sum of money expressed in a foreign currency can legitimately be claimed by the plaintiff and decreed by the court. It is unnecessary for us to categorize the cases in which such a claim can be made and decreed. They have been sufficiently indicated in the English decisions referred to by us above. Such : 11 : instances can, however, never be exhausted because the law cannot afford to be static but must constantly develop and progress as the society to which it applies, changes its complexion and old ideologies and concepts are discarded and replaced by new. Suffice it to say that the case with which we are concerned was one which fell in this category. In such a suit, 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. If 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 on 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 : 12 : 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 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. 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 y 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 : 13 : 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. 71. Turning now to arbitration, on principle there can be and should be no difference between an award made by arbitrators or an umpire and a decree of a court. 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 the 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 : 14 : 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 purposes 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 Foreign Exchange Regulation Act, 1973." 21. The senior counsel for the ONGC, on the one hand placed heavy reliance on paragraph 71 of the judgment in Forasol Forasol Forasol while the counsel for the claimants relied upon paragraph 41 and 70 of the report. 22. Mr. R.V. Govilkar, the counsel for the claimants also placed reliance upon the two judgments of the Supreme Court in the case of Renu Sagar Power Renu Sagar Power Renu Sagar Power Company Company Company Vs. General Electric Company Limited, 1991 Vs. General Electric Company Limited, 1991 Vs. General Electric Company Limited, 1991 Supp.(1) Supp.(1) Supp.(1) SCC 155 SCC 155 SCC 155 and Renu Sagar Power Company Vs. Renu Sagar Power Company Vs. Renu Sagar Power Company Vs. General General General Electric Company Limited, AIR 1994 SC 860 Electric Company Limited, AIR 1994 SC 860 Electric Company Limited, AIR 1994 SC 860. We shall refer to these judgments as Renu Sagar Power Renu Sagar Power Renu Sagar Power Company Company Company Ist Ist Ist and Renu Sagar Power Company IInd Renu Sagar Power Company IInd Renu Sagar Power Company IInd, respectively. : 15 : 23. In Renu