FORASOL v. OIL & NATURAL GAS COMMISSION (AND VICE VERSA)

Citation: [1984] 1 S.C.R. 526

Court: Supreme Court of India

Bench: SABYASACHI MUKHERJI, D.P. MADON

Case summary

If Forasol were to indicate sepa~ rately in its invoices the payment to be made to it in French Francs and in Indian rupees and if the payment of such ·Francs was to be niade in Paris, France, in French Francs, the Question of providing for a rate·of exchange in the , said...

Judgment text

I FORASOL ' . A v. OIL & NATURAL GAS COMMISSION 0 (AND VICE VERSA) October 25, 1983 [D. P. MADON AND SABYASACH! MUKHARJi, JJ. j • Code of Civil Procedure, 1908-s. 47-Decree passed according to award in foreign curre'ncy without fixing rate Of exchange-In execution pro- . ceedings court niust decide and select proper date for fix/11g rate of exchange-Criteria for selection of date-Date which puts plaint~ff iii same posiiion in which he would have been had the defendant discharged his obligation when he ought to have done. Proper date is the date ofdecree. Arbitration Act, 1940-:-s. 17-Judginent according to the award-When it is. Provisions ofs. 17 are different from the provisiOns Ofs. 26 (1) ofthe English Arbitration Act. Precedents-English' decisions not binding but have high pursJ. 1asiv. r value. -~ Prac/ice & procedure-General practice & procedure . to be followed .

by plaintiff while claiming suni in foreign currency, arbitrator while making the · award and court while passing d~cree-Lai~ down. Forasol, it French Company having its principal office in P·aris,' Ffance, entered· into a contract on February 17, 1964 with Oil and Natural Gas Commission (ONGC), a Govern~ent of I~dia undCrtaking, for carrying. out . ,- ·structural drilling in relation to the 'exploration for . oil. in India. Jllrticle IX-3 of the contract provided that the amount payable to Fora$Ol on account of .. operatiOnal fee, standqy fee, and equipment charges shall ·be computed in French Francs and ONGC shall pay so3· of that amount in French Francs,in Paris, France_, and the remaining 20% in Indian rupees using a fixed conversion rate of FF. 1. 033=Re. 1. 000. Art IX~1. 2 provided that certain other charges, e. g. , insurance, freight,. etc. , incurred by.

Forasol were to be reimburzed to Parasol by ONGC in "Indian rupees if the expenditure was initially incurred by Parasol in Indian rupees, otherwise in French Francs. Article X-2, X-3 ,and X-4 of the contract set out estimates of the payments to be made to Forasol in Frensh Francs, the invoicing 'rules and the rate of payment. Under_ Art. X·3. 3, Forasol was to ilidicate in each of its invoices, the amount payable ·to it in French Francs and the amount payable to it in Indian rupees un~r the con· tract. Art. XI provided for paymentS to be made to Forasol in Indian rupees. The contract which was initially for a period of one year was extended twice and Addendum Nos. 1, 2 & 3 were added to the Contract. During the extended' period of the contract the Indian rupee was devalued in June 1966 and consequently Forasol ID:ade a claim tor conversion of Indian rupees into French • • FORASOL V. 0. 11. 0. COMMISSION 527 Francs at a rate higher than the rate specified in Art. IX-3.

The disputes and differences which arose between the partie~ were referr. cd to arbitration.. The Umpfre who made the award directed certain payments to be made in French Francs, but did not specify the rate of exchange at which the French Francs were to be converted into Indian rupees. The award further directed that from November 30~ 1966, the rupee portion should be converted at the higher rate of FF. 1,000 equal to rupees 1,517. 80. The award was filed in the Delhi High Court and the High Court passed a decree in terms of the award simpliciter Without fixing ~ny date for Conversion of the French Francs into Indian · rupees, with interest at the rate of 6% per annun1 fron1 the date of the decree till the date of payment Neither party raised any objection lo tl1e said·award or. to the form in which the said decree was passed. Forasol filed an applica· tion in the High Court for. execution of the decree..

ONGC contended that tho enhanced rate of exchange specified in the award was appliCable only with respect to the interest payable to 'Forasol from November 30, 1966 and that to the rest of the payments to be 1nade under the award either in French Francs or in Indian rupee, the contract rate of exchange was applicable. I\ single Judge of the High Court held that the coniract rate of exchange applied only to the rupee part of' the payn1ent in respect of the 'iten1s specified in Art. IX- 3. 1 and that in respect of the other paymeD. ts to be made ·to Forasol in French Francs the rate of exchange prevailing at the date of the decree would apply. In appeal, a Division Bench of the High Court held that the enhanced rate of exchange specified in th~ award applied only to the interest payable to Forasol and tliat with respect. to the rupee amount the contract rate of exchange applied. It further held that as the award was in French Francs, by reasons of the provisioD.

s of the Foreign Exchang~ Regulation Act, 1973, before execu· ting the award the French Francs would have to be converted into· Indian " rupees at the rate of exchange ·prevailing on the date of the said award. Thi~ judgment and order of the Division Bench was. challenged in these cross appCa1s. The questions which arose for consideration were: (1) Whether the rate of conversion mefltioned in the coritract applied to all the payments to be made under the;: contract whether' in Indian 1upees or in Fren~h Francs, or only to 20 per cent of the amount in French Francs, payable by ONGC to Porasol in Indian rupees in respect of Forasol's operational fee, standby fee and equipment charges; t2) whether the enhanced rate of exchan~e specified in the award· was applicable to all the payments in Indian rupees under Art. IX-3. 1 of the contract to be made by ONGC to Forasol or only to the interest .. 0! 1 the amount in French Francs payable to Forasol by, ONGC; and t3) which was.

the proper date to be selected for converting into Jndian,rupees the French Francs part of the award in respect of which no rate of exchange ·had been fixied either by the contrac~ or by the award ? Two further. questions which were inextricably Jinked with question No. (3) above were: (1) whether an arbitrator or umpire can make an award in a foreign currency; and (2) whether a court can simplicit~r pass a decree in terrr. s of such an award wit-bout speci· fying the rate of exchange at which the foreign currency amount will have to be converted into Indian rupees. Allowing the appeal of Forasol and dismissing that of ONGC, • HELD : I. U. nder Art. IX-3. l of the contract For... ol . had a¥reed to accept 20 per cent of Its operational fee, standby fee and equipment charges in Indian rupees but wanted Jh~t the remaining 80 per cent of these fees and I charges as also the other amounts which were ·payable to it under the contract should be paid to it in·F. rench Francs only.

If Forasol were to indicate sepa~ rately in its invoices the payment to be made to it in French Francs and in Indian rupees and if the payment of such ·Francs was to be niade in Paris, France, in French Francs, the Question of providing for a rate·of exchange in the , said contract for cOnverting French Francs into Indian rupees cannot arise. Such , conversion rate could only be in respect of the amount payable to Forasol in - Indian rupees. It is thus only the 20 per cent of the said fees and charges coiTiputed in French in Forasol's invoices bui payable-in Indian rupees which was to be converted at the rate of exchange specified in the contrac~. This interpretatiOn receives further suppOrt from Art. 2. 2 of Addendum No. 2 and· Art. -2. 5 of Addendum N·o. 3 under which amounts iefundable by Forasol to ONG_C wCre to be refunded iri the same currency in which ONGC had paid th~ earlier. [544 C-F] • 2 The Division Bench of the High Court was in er. tor in.

holding that the enhanced rate of exchan_ge specified in the award applied only to the amou_nt of interest payable to Forasol. The enhanced rate of exchange . applied to the payments in Indian. rupees. under Art. lX-3:1 of the contract to be made by ONGC to Forasol from and after November 30, 1966. [548 D·E] 3. In an action to recover an amount pa)'able in a foreign ·currency, five"dates compete for selection by t. he Court-as the proper date for fixing the ~ rate of exchange at which the foreign currency amount has to be coverted into ( -.... the currency of the country in which the action has been commenced and • ). j~ decided. These dat~s are : (I) the date when the amount be. came due aod payable; (2) the date of commencement of the action; ~ (3) . the date of the decree; (4) the date when the court ordCrs execution to issue; and (5) the date when the decretal amount is paid or realized. In a case where a decree had 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. [548G-549B] The question which one -out of the dates mentioned above is the proper date to be selected by the Court does not appear to have been decided in t~is country. The question, however, has formed the subject-matter of decisions - in England. Th~ English decisions are of Courts of a country froo:l whiCh we have derived our jurisprudence and a large part of our laws and in which the · judgments were delivered by judges held in high repute. Undoubtedly, none FOR~SOL V. O. N. G. COMMISSION of tbeS"e decisions are binding upon this Court but they are authorities of high pursuasive valu_e to which we may legitimately _turn for assistance.. Whether the rule laid down in any of· these cases can be applied by our Courts mus~, however, be j_udged in the conteXt of our own Jaws and Jegal procedure and the practical realities of. litigation in our country. [549G; 5680] . _? ' ' Miliangos 'i.

George Frank (Textiles) Ltd. , L. R. [1976] A. C. 443; Tom- · kinson and Anr. v. First Pennsyl_vania Banking &,Trust Co. , L. R. {1961] A. C. 1007; [1960] 2 Ail E. R. 332; Sub-nom in re United Fat/ways of Hal'ana and Reg/a Warehouses Ltd. , L. R. [1960] Ch, 52; [1959] l All E. R. 214; Jugos/a- . venska Oceanska Plovibda v. Castle Investment Co. Inc. , ,[1973] 3 All E. R. 498~ . ,Beswick v. Beswick, L. R· [1968] A. C 58; [1967] 2 All E. R. 1197; Dr. Mann, The Legal Aspect of Money, 3rd Edn. [1971], p. 363; Sdorsch Meier G. m. b H. v. Rennin, [1975] I All E. R. 152;· Miliangos v. G~"'ge Frank (Textiles) Ltd. , [1975] I All E. R. 1076; Practice Statement (Judical Precedent), (1966) I W. L. R 1234; ·Owners ofM. V. E/eftherolria v. The Owners fJ/ ·M. V. Despina R-The Dispina Rand Services Eu. rope At/antique Sud (Seas) Of Paris V. Stockholms Rederiaktiebolag S~ea ofStockholm, L. R. [1979] A. C: 685; Practice directions, [1976] 1 W. L. R. 83; ·[1976] I All E. R.

669; The Zafiro, John Carl/om & Co. Lid. v. Owner;ofS. S. Zafiro, L. R. (1960) p. I at 14; [1959] 2 All~ . R.. 537 at 544; E. D. &. F. Man v. Socfete Annonyme Tripolitiane Das Usines De Raffinage De Sucre, t1970] 2 Llyod's L. Rep. 416 and Russel on Arbitration; 20th edn. page 375, referred to. 4. When a foreigner Pas to receive a sum of money ~hich shpuld j~stIY be payable to him in a foreign currency and because of the default of the paying party, seeks to recoyer its payment through the court, the first question which arises is whether a court in India would have jurisdiction to pass a decree for a sum' expressed ill a foreign currency. Though on princjple there Is no r~sOn why a court should not be able to do so, nO court can ~ass a decree directing a.

defendant to do an impossible or an illegal act and in view Of the ·provisions of our Fo~eign Excl;iange Regulation Act, 1973) ·and the restrictions contained tlierein on making payments in a foreign currency, if a decree were to be passed simpliciter for a sum expressed in a foreign currency, it would be to direct the defendant io do an 'act which Would be in violation of the Foreign Exchan&e Regulation· Act, 1973. Such a decrCe can, therefore, only be passed ' by making the payment in foreign currency subject to the permission of the foreign exchange authorities beinc: granted. If, however, the authorities do not grant permission for payment of the judgment debt in foreigri currency, it would not be pOssible for the defendant to make. such. payment, resulting in the decree becoming irifructuous and the plaintiff getting nothing under it.

The court must, therefore, provide- for the eventuality -of the foreign exchange authorities not granting the requisite permission or even if such permission is given, the defendant not paying the decretal debt, or not wanting to discharge ihe decree _by making payment1n foreign currency or in Indian rupees. This can only be done bY t. he decree pfoviding in the alternative for payment of sum of money in Indian rupees, which will be equivalent to the sum decreed in foreign currency. It is but just that a man, who is in law entitled to receive a su1n of monCy in a foreign currency, should either receive it in such currency or should receive its equiva~ent in Indian rupees. It is here that. the question ... ' of the date which the court should select for converting foreig11 currency into Indian rupee~ arise. The court n1ust select a date which puts the plaintiff in ~he same position in which he would have been had the defend.

ant ~ischarged his obligation when he ougl\t to have done, bearing in inind that the rate of exchange is not a constant factor but fluctuates, and . very often violently fluctuates, from time to time. The. date when the amount became due and payable, docs not have the effect of putting the plaintiff in the same positjOn in which he would have been had the. defendant dischafged his obliga~ion when he should have done because between that date and the date when-. the suit is deCreed [the rate of exchange may have fluctuated to the plaintiff's prejudice, resulting in the a:11ounf decreed. in rupees representing only a fraction of what he was entitled to rCceiVe. Equally, the possibility of the plaintiff getting mo;e than ·whai he had bargain~ ed for in case the rate of exchange. had fluctuated in hia favour cannot be ruled out. To select the date when the a1nount became du;or the "breach date'·', as. tlie English courts have terfiled it, is thus·to expose th ; o. N. o.

COMMISSION S33 order. ln'all such cases, execuiion can only issue for the rupee equivalent specified in the decree, appellate d~cree or final order, ·as the case may be. These questions, of course, would not arise if pending appeal or other proceedings· adopted 1Jy tμe · defendant the decree l1as been executed of the money thereunder received by the plaintiff. [587D-589C] I s. ' Just as the courts have. power tO make a decree for a ·sum of money expressed in a foreign curency subject to the limitaions and cOnditlons set out above, the-arbitrators or umpire have the power to make an a~ard for a_sum of money expressed in a foreign currency. The arbitrators or umpire should, hoWever, provide in the awar~ for the rate of exchange at which tlte sum awarded in a foreign cu,rrency should be converted in the events mentioned above. This may be done by the arbitrators or umpire taking.

either the rate ofexchange prevailing on the date of the award or the date nearest or most ne~rly preceding the date of the award·or by directing that the rate of exchange 0 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 jndgment as the court' may determine. ·If the arbitrators or umpire omit to p~ovide for the rate of coversion, this would not by itself·be sufficient to invalidate ihe award. The court May either remit the award,undei: section 16 of the. Arbitration Act, 1940, for the purpose of . fixing the ·date ,of convCrsiori or may do so itself taking the date of conversion as the date of its judgment ·or the date nearest or inost nearly preceding it,· following the procedure outlined abOve for· the purpose of proof of the rate of exchange prevailing On-such date.

If, howe~ver, 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 1nade ~ 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, 9; In the instant case the party·entitled to recei~~ the money-Forasol-Was · a foreign party. -Under the said contract, the currency . of accouDt was a foreign currency and so was the currency of payment except for a portion thereof. Forasol was, therefore, entitled, on payment not being made to it by ONGC, to receive in French Francs the amounts which became. payable to it in that currency. The Uinpire was, therefore, justified in Providing that the amounts payable under,the said award to Forasol in French Francs should be paid i~ French currency.

The Umpire has, how_ever; neither provided tl:~at such payment would be subject to the permission ~of the foreign excha"nge authorities being obtained nor specified. the,,conversion rate to be applied in the· eventu~ 8. Uties set-0ut above. That, however, dees not make any difference becaus~ neither party has objected to the said _award on this ground. On the contrary, both parties have accepted the said award as binding and conclusive, As mentioned above, this ·omission on the part of the Umpire could have been corrected by the High Court when it came to pronounce jlldg'ment according to. the said award and pass the said decree in terms thereof. The decree passed in ; terms_of the said award, however, does not specify either the rupee equivalent . of the amount in French Francs payable to Forasol or the rate of exchange at wl~. ich the conversion of such,am? unt into Indian rupees should be made. To that pxtent, tho decree pas!! C! I in terms of the said award hr t.

he HiJh Court w~s not 534 SUPREME COURT RllPORTS (1984) 1 S,C. R. ... proper decree. Both the partiCs have, however, accepted the said decree and have not challenged it on' this ground in any proceedings. Jn any eVent, the aforesaid mistake in the said decree was one which could have been got corrcc· ted by an application for review or by an appltcation under section 152 or;in any event under section 151, of the Code of Civil Pcocedure 1908. The decree has noW become final and binding upon the Parties. Bdth the paities have acCeptcd the said dec~ee and the said deC:ree cannot, therefore, be said to be invalid on the ground of the above omission to specify either the rupees equi· valcnt of the French Franc portion of the said award or the . rate of exchange at which such French Franc portion was to be ccnverted into its rupee equivalet;it. For theioe reasons we hold that the learned Sing:. e Judge rightly took the date of the decree as the date of conyersion.

[590C-591Bj CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6;! 8 & 629 of 1981. Appeals by Special Le;tve from the Judgment and Order dated the 21st December, 1979 of the Delhi High . Court in E:F. A. (0. S. ) No: 5 of 1977. Shankar Ghosh, and D. N. Gupta, for the Appellant in CA. 628/81 & for Respondent in CA. No. 629/81. B. Dutta for the Respondent in CA. 628/81 and for appellants in CA. No. 629/81. Tlie Judgment of the Court was delivered by MADON, J. Thesa cross appeali by special leave arise out of execution proceedings adopted by Forasol, a French Company,. having its principal office in Paris, France, against the Oil and , Naiural Gas Commission, a statutory bod'. Y incorporated under the Oil and Natural Gas Commission Act, 1959 (Act XLlll of 1959), hereinafter for the sake of brevity referred to as 'ONGC'. On July 30, 1962 the Government or'India invited global tenders for structural drilling for exploration of oil in the Jaisalmer area of the State of Rajasthan.

The tender of Forasol was accepted by the Gover~ment of India and in pursuance thereof a contract dated February 17, 1964, headed "Structural' Drilling Contract", was entered into between Oi'! GC and Forasol. Under the said contract, ONGC engaged Forasol to carry out structural drilling in relation to the exploration for oil in the Jaisalmer area of the ·State of Rajas- \1:\an on the \erms and conditions contained in the said contract. FORASOL v. O. N. G. COMMISSION (Madon, J. ) 535 . . The said contract was fo·r a period of one year commencing from the date of the start of the drilling work. The said contract also gave an option to ONGC to extend the period by one more year. Arti~le IX-3 of the said contract dealt with the currency of payment. It provided as follows : "IX-3. 1. The operational fee, standby fee and B equipment charges payable to FORASOL have been specified in French Francs in Article_IX-1. 1. 1 to IX-1. I. 10 above.

The'amount payable to FORASOL on accounl of aforesaid fees and charges shall be computed in French Francs ONGC shall pay 80% of the aforesaid amount in G French Francs and the remaining 20% in Indian Rupees using a fixed conversion°rate of FF. J. 033=Re. 1. 000. " • Under Article IX-3. 2 the cosl as well as the insurance, packing, forwarding a. nd clearing charges in respect of the materials provided by Forasol and the freight, insurance, paeking, forwarding and clea- . • ring charges for transportation from a sea port or air port in France to India and back to a sea port in France or outside France if Forasol so chose, in respect of the rig, equipment, machinery, tools and other materials provided by Forasol were to be reimbursed to Forasol by ONGC in Indian rupees, if the expenditure was initially l! l incurred by Forasol in Indian rupees, otherwise in French Francs.

• Under a Credit Agreement arrived at between the Gqvernment of India and the Goveq1ment of Fra_nce, the Government of France bad agreed to provide credit facilities to a limited extent to . the Government of India for the import of plant, machinery, equipment I and materials and for execution of certain projects including oil exploration. Under the said Credit Agreement, credit was to be given by the French' suppliers to the Indian buyers in the form of acceptance of payments on• deferred basis upon the conditions laid down in. the letters dated February 5,. 1 I Single Judge directed that ONGC could satisfy the judgment de6t · by making payment iri French Francs ot, ff it so preferred, by paying the equivalent of it in Indian rup,ees at the rate . of exchange prevail, • ing at the date of the decree and further ordered that if the decretal airloun. t was not paid within two weeks, . attaehmeni as prayed. for i.... should issue. Against the said judgment and order of the learned .

Single Judge ONGC filed an intra;court appeal being E. F. A. (OS) ~ 5 of 1977. The Diyision Bench of the Delhi. High Court, which • heard the said appeal, upheld the contention of ONGC that . the • .. ,. _. FORASOL Ii. O,N. G. CoMMISSION (Madon, J. ) $41 ',. enhanced rate of etchange specified in the said award applied only to the interest payable to Forasol and that With respect to' the rupee amount due to ONGC. and which was to be adjusted against French. Francs payable to Forasol, the contract rate of exchange applied. It further held that as the said award was in French Francs, by reason of the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), before executing the said award the French Francs w~uld have to be converted into Indian·rupees at the rate ofexchange prevailing on the date of the said award, namely, FF 1. 000 equal to Rupee I. 831. · The Division Bench negatived the other contentions raised by ONGC.

·It is against this judgment and order of the ' Division Bench of the Delhi High Court that the present cross · . appeals have been filed, • • . So far as Forasol's appeal is concerned, four points were urged on its behalf before us. The~e points were : I. The rate of exchange specified in Article IX-3. 1 of the said contract, namely, . FF 1. 033 equal to Re. . . ,J. - I. 000, was applicable only to 20 per cent of the payment to be made in Indian rupees by ONGC to · ~ Forasol. • 2. The Umpire by the said award fixed the rate of • exchange at FF 1. 000 equal to Rs. 1. 5178 as from Noveniber 30, 1966, ,in respect of such rupee pa)ments only' •• . ·. ? -· • 3. The, su111. •of R,s. 10,19,380. 39~ being the balance amount of the sum of Rs. 11,95;304 which remain- . Ji_ ed payable to ONGC by Forasol in respect of..

the ineome-tax paid by ONGC on behalf of Forasol after making adjustments against ·the claim· of Forasol, was to be adjusted, as directed by the said award, against Forasol's claim in French Francs on the respective dates of each payment of tax, namely, on September 14, 1967, February 14, 1968, and March 23, 1968, and as all these payments were made after . November 30, 1966,· and as under the said award the enhanced rate· of ~xchange was directed to a:pply 'to • 542 SUl>RBMI! COURT llEPOJl. TS (1984) 1 8. C. R. both parties, the said sum of Rs. JO,i'IJ,383. 39 was to be adjusted :against the French Franc claim of · Forasol at the enhanced rate of FF 1. 000 equal to Rs. 1. 5178. \ ' . \. ,_ 4.

So far as the payment to Forasol iri French Francs was concerned, neither the said contract nor the sajd award provided for conversion of French Francs into Indian rupees and the said decree having been passed in foreign currency, in case ONGC did not or • could not make payment in French Francs, th~ rate of conversion of French Francs, into Indian rupees could only be at the rate of exchange prevailing at . the . date of the said decree, that is, on May 7, 1975, •· which was FF 1. 000 equal to Rs·. 1. 938. ONGC, on the other band, submitted that the said contract provided a fixed r! lte of exchange of FF 1. 033 equal to Re. 1. 000 for all amounts payable under the said contract, whether in rupees or in French Francs, and, therefore, that rate alone should be taken as the correct conversion ratio except with respect to interest on the amount in Franch Francs payable to Forasol in respect of which the Umpire had enhanced the rate of exchange to FF 1. 000 equal to l! l Rs. 1. 5178.

In the alternative, it was submitted that the. conversion rate should be the one prevailing at the date of the said aw. ard, that is. , on December 21, 1974, namely, FF 1. 000 equal to Rs. 1. 831. Thus, there are four different rates of exchange which feature in this case, namely, :.... . . . • ' Rate provided in the FF 1. 033 . , = ;;. Rs. 1. 000 said contract . ""· Rate fixed by the FF 1. 000 Rs. 1. 5178 l,Jmpire • Rate at the date of the FF 1. 000 Rs. 1. 831 said award namely on December 21, 1974 Rate at the date of FF 1. 000 Rs. 1. 938 the decree, namely, on May 7, 1975 FORASOL v. o:N. G. COMMISSION (Madon, J. ) 543 i- We shall first examine the said ~ntract to determine whether the rate of conversion mentioned in the said Article IX-3. 1 applied o~ly to 20 per cent of the amounts in French Francs payable by ONGC to Forasol in Indian rupees in respect of Forasol's. operational fee, st! l!

ld· by fee and equipment charges as contended by Forasol or whether it applied to all payments to be made under tl:ie said contract, whether in rupees or in'French Francs, as contended by ONGC. In doing so, -a cardinal fact must be borne in. mind, namely, that it was a contract entered into between a foreign party and a Government of India undertaking and that under the said contract the foreign party had agreed to carry out structural drilling in relation to the exploration for oil, discovery of oil being of vital importance to the national interests of India. - From the nature of things, the foreign party. would not desire payment for the services to be rendered and the equipment to be supplied by it in a currency with which it had no connection and of the continuous stability of which it could not be certain. The foreign party would, therefore, naturally desire and bargain for payment in the -currency of its own country, namely; in French 0 currency.

The more so, as under the Credit Agreeinerit 'entered into between ·the Government of -France and the Government of India the Government of France had agreed that credit should be I ---r given by French suppliers to Indian buyers by accepting payment on deferred basis for the import of plant, machinery, equipment and . ,1 materials and execution of certain projects including oil exploration, and, accordingly, under Article X-1. 1 of the said contract the French· party, Forasol, had agreed to accept on deferred basis payment of. the amounts due to it in French Francs. We have earlier referred to the relevant Articles of the said contract as also extracted some of them in order to emphasize that though under the said Article IX-3. 1 Forasol had agreed to accept 20 per cent of.

its operational fee, standby fee and equipment charges in Indian Rupees, it wanted that ' the remaining SO per cent of these fees (lnd charges as also ·the other amounts which were payable to it under the said contract should be paid to it in French. Francs only and should not be made _dependent upon the. stability of the Indian rupee in the international monetary market. To recapitulate, the invoicing rules provided that in each of its invoices Forasol should indicate separately the amount payable to itin French Francs and. the amount payable to it in Indian rupees and that so far as the French. Franc p;;rt was concerned, an initial payment was to be made immediately upon the signing of the said contract and the balance was to be paid by remittances in French Francs. Such remittances were to be made by Forasol presenting • rS44 · · " SUPIUlMI! COUR. T REPORTS (1984) 1s. c. a. to ON6C a set of promissory notes payable in Paris and. under 'A Article X-4 2.

2 of the said contract ONGC Irrevocably bound itself ' . to pay in French Francs the promissory notes given by it to Foras'ol, . ' Siftlilar provisions were made in the said contract for payment of ;interest and insurance. charges to Forasol. If Forasol were to indicate separately in its invoices the payment to be made to it. in •French Francs and in Indian rupees and ifthe payment of such B :French Francs was to be· made in Paris in French Francs, the · question of providing fur a rate of exchange in the said contract for converting French Francs into Indian rupee cannot arise. Such . conversion rate eould only. be in respect of the amounts payable. to . Forasol in Indian rupees. It is pertinent to notethat under Articie . IX-3. 1: tlie amount of fees and charges payable to F,orasi>l were to be . computed in French Francs and thereafte~ 80 per cent thereof was to be paid·in French Francs and the· remaining in Indian rupees.

Even with respect to such twenty per cent Forasol did not want to · be dependent upon a possible fluctuation 'in the exchange rate of · rupee and, therefore,_the 20 per cent part of the amount computed D in Frel\Ch Francs was covenanted to be converted at a fixed rate ·provided in the said Article IX-3. 1. This is made abundantly clear . by the express terms of the said Article IX·3. 1 when it states that "ONGC shall pay 80% of the aforesaid amount in French Francs . and the remaining 20% in Indian Rupees using a fixed conversion rate I '> ofFFJ. 033=Re. 1. 000;" It is thus only the 20 per'cent of the said . fees and charges. computed in French Francs in Forasol's invoices ··but payable in Indian rupee. s which was to be converted at, the aforesaid rate 'of exchange specified in the said contract. This_ . . interpretation receive. s further support from Article 2. 2 of Addendum ~No. 2and Article 2. 5 of Addendum No.. 3 extracted above under ..

which amounts refundable by·Forasol to ONGC were to be refunded "F .. in ·the same currency in which. ONGC had paid them earlier. The . contention of ONG. C that the fixed rate of conversion provided in Article IX:3. 1 applied to ali payments to be mad~ under the 'sai·d coi1tra_ct to Forasol. must, therefore, be rejected. ; What next falls to be considered is whether the enhanced rate c;if exchange specified by the Umpire in the said a\vard applied only . to the. amount payable by way of iriteresl to-Forasol as contended by t. ONGC; This contention. was-rejected by the learned Single judge but ···H i. found favour with the· Division Bench of the Delhi High Court. fo is :. necessary to set out some •further. facts in order to decide this point. t Duringthe course or'the hearing before the Umpire, ONGC l! ad • , . .. FOllASOL '· O. N. G. COMMISSION (Madon, J.

) 5~5 filed a'statement showing the adjustment offhe amount of French Francs due to Forasol against the amount of income-tax paid by ONGC. on behalf of ForasoL It was, however, erro. neously assumed by the Umpire,that the s~id statement was an agreed one. After the Umpire had drafted his award he handed over a copy of. ii to the parties in order that they might point out to him any incorrect statements or mistakes of a clerical or similar nature so that he could. correct tlie same before the award was made and published. Accordingly, both the parties appeared before the Umpire and agreed that there were certain errors iii the draft award and requested the Umpire to correct these errors before he made and Published his award. The Umpire thereupon corrected the errors jointly pointed out to ·him by appending an Erratum to the said award.

In the said Erratum the Umpire pointed out that the aforesaid statement was not an agreed one ahd he directed that certain portions of the· award should. be deletedand substituted by fresh. paragraphs set out in the said Erraturd. In the said Erratum the Umpire first pointed out -certain errors of calculation and in the mentioning of figures which had been occurred. He then proceeded to state,: ) . -r "Incidentally it was pointed out that the ·statement on pages 145-6 and in the penu)timate and last two. para- . ,1 graphs on page 149 regarding the document filed b~fore me, . as regards the adjustment of FF claims due to. Forasol ll against ,the income-tax'paid by ONGC was not an ,agreed statement,' but a· statement prepared by O. N,G. C. on their own to which Fora. SI had not. consented,. As a result of this, the question of adjnstment of the income-tax paid a'[! ainst FF claims, as set out in the last para on page 149 .

and in the first two paragraphs on page 150 would be deleted and in their. place the Aw. ard would state that 'the amounts ofincome-tax paid. by ONGC shall be adjusted against the FF claims due to Forasol on tbe. date when each amount was paid in the manner set out earlier 'in the Award. ' ~- I • " "To achieve this purpose the paragraphs·on·pages 149 and 150 beginning withthe words 'In the ca:lculatjon of the interest on the several invoices' and ending ·with 'I Jiave'lllready dealt with the conversion rate. and. there is no need to go into it again' •n page 150. shalt:be deleted . and a new. parag(aph. inierted;. which wllrread as folio. vis: • 546 SUl>REME cotiRt RllroRTs 11984) 1 s. c. it. .. x x ' x x . x ' ... as a result the aggregate figure of interest payable to Forasol by O. N. G. C. upto 30·6·1974 would be FF 12,91,290,06. From this a small adjustment hks to be made... when these are adjusted the amount due for interest by O. N. G. C. to Forasol would be FF 12. 88. 185. 35.

' 'This figure of FF 12,91,290. 06 has been calculated on the basis of conversion rate of FF 1. 033 to a rupee (or FF 1033 for every Rs. 1,000/·)which was the rate of exchange agreed to between thee parties under Article XI.. 1. 1. 1 of the Agreement. Messrs Forasol have put forward before me a claim for enhanced rate of interest and their. claim is that this should be Rs. 1,5178 for every FF or Rs. , 1517,80for every FF 1,000, I find that there is consi· derable correspondence in the course of which they have mode ·a claim that after devaluation ofthe rupeethere should be a change in the rate of exchange, Though there is no speific letter in the. file agreeing to the enhancement I find that in the later invoices demand has. been made subject to the claim for enhanced rate of exchange. In view of this I : consider. that from 30,11,1966 Rupee portion should be Con>erted at FF 1 =Rs. 1. 5178 or FF 100= Rs. 1. 517. 80. Of course this rate of ex.

change would ·~pply' to both the parties, Farasol and the O. N. G. C. ' . 'As stated earlier this has been worked out only upto 30. 6. 1974 and in accordance with the directions contained in this award interest shall be calculated on the principal amount right upto 21. 12. 1974 on the entire amount of. ·"--. principal and the entire sum of principal and . interest would thereafter carry interest at 6% per annum, as stated :. i. in the othe_r port. ion of the award. '' • • G' (The emphasis has been supplied by us. ) Article XI-1. 1 of the saill contract referred to in the said , Erratum provided as follow :- _;_ • "Xl·l. 1. 1 On the basis of the figures arrived at in Articles IX·2. 1 and IX-2. 2 aiove ancHn accordance with the eondition laid 4own in Article IX-3. I above, the tota\ • •• • FORASOL v. O. N. G. COMMISSION (Madon, J.

) 547 of FORASOL's operational and standby fees, equipment charges and transportation charges payable in Indian Rupees under this contract, is estimated to be FF 1,495, 216, Following signature of this contract, ONGC shall pay to FORASOL, as an advance, 10% of this amount i. e. FF 149,522 in Indian Rupees using a conv~sion rate of FF 1. 033 = Rs. 1. 000. " 8 In order to reach the conclusion which it did, the Division' Bench of the Delhi High Court relied upon that portion of the said Erratum where the Umpire has stated that Forasol has put ·forward befor him a claim for "enhance --c ' They have however, reached differing conclusions, theleamed -Single Judge holding that the conversion of French Francs into Indian (! ) L. R. (1976] A. C. 443. 550 SUPREME COURT RBPORTS (1984) 1 s. c. R.

rupees should be made at the rate of exchange prevailing on the date of the said decree and the Division Bench holding that such conversion should be at the rate of exchange prevailing at the date of the said award. It will be convenient, theretore, to turn now to the ' . English decisions on the point to ascertain whether we can find some 'gujE! ance from them in arriving at our concluson. The judicial view on this point in England has undergone a radical change and it will .... not be out of place to ascertain the earlier view which the courts in England iook and the view which now prevails with them and to take a brief survey of how this change in view came about. · In Tomkinson and another v. first Pennsylvania Banking & Trust 1 Co. ( ) (better known as the Havana case) ou appeal from the deci- >- 4· sion of the Court of Appeal, sub-nom In re United Railways of Havana and Regla Warehouses Ltd.

,(') after reviewing the earlier ·authorities, the House of Lords held that an English court cannot ·· give judgment for payment of an amount in foreign currency, and that for the purposes of litigation in England a debt expressed in a foreign currency must be converted into sterling with reference to the rate of exchange prevailing on the date when the debt was payable. Lord Denning, who was then a member of the House of Lords, delivered a concurring judgment in which he pointed out that the origin of this rule was tbat sterling was for a long time regarded 8 as a stable currency, the constant unit of value by which, in the eye of the law, everything else was measured, and!

that so long as sterling was regarded as stable while other currencies fluctuated, justice was best done by taking the rate of exchange ·at the date of the breach; the creditor being entitled to ·be put into as good a position as if the debtor had done his duty and paid the debt on the due date and the creditor was only truly put into such a pasition if the debt was converted into sterling at that date. At the:same time Lord Denning also posed a question whether the rule was still to be applied when sterling had lost the value which it once had by reason of the devaluation of the pound. He however, came to the conclusion that though such a rule was apt to produce an injustice to a foreign creditor who was owed money in the currency of his own country if he chose to sue in English courts instead of his own, he must put up with the consequences. The rule affirmed in the Havana case is 0 known as the breach date rule"; . (I) L-R. [1961] A-C. 1007 ~ (1960] 2 All B. R" 332, ' (2) L. R.

(1960) Cb. 52 ~ [1959] I All E. R. 214. FORASOL v. O,N,G, COMMISSION (Madon, J. ) 551 .. The next decision which requires to be noticed is that of the Court of Appeal in Jugoslavenska Oceanska' P/ovibdo v. Castle In- 1 vestment Co.. Inc. ( ) As this authority was relied upcin by the Division Bench of the Delhi High Court in order to arrive at its decision on this part of thecase and as it formed the sheet-anchor of the submission made on behalf of ONGC that the proper date of· conversion should be the date of the award, it is necessary to exa- 1 mine what was decided in this case in some detai • In that case, the plaintiffs were awarded a sum expressed in United States dollars in an ·arbitration held in London. · The defendants having failed to pay the sum awarded, the plaintiffs sought leave of the court under section 26 of the Arbitration Act,. 195 1, of England to enforce the award.

In support of their application the plaintiffs filed an affidavit showing the rate of exchange prevailing at the date ·of the award and the amount of the award in pound·sterling and claimed the amount due under the award on the said basis. The questions which fen. fot determination were whether an award expressed in a curre11cY other than sterling was valid and lawful and, if so, whether it was enforceable under the said section 26. The Master dismissed the application and the order of dismissal was affirmed by Kerr J. On appeal, t! te court of Appeal held that the award was valid and leave should be granted _to enforce it, On the question whether English arbitrators have jurisd. iction' to make an award for p~yment in foreign currency, the Courfheld that ii1 a proper case they could do .

E so and that in the case before them since the money of account and the money of payment under the charterparty out cif which the • disputes between the parties arose were expressed in Unjted States dollars the arbitrators were entitled to make their award in the same . . . currency. It was further held that leave should be granted to enforce an award expressed in a foreign currency provided the applicant had filed an affidavit showing the rate of exchange prevailing at the date of the award and giving the amount ·or ihe award converted into sterling. When that case fell to be decided Lord Denning was member of the Court of Appeal, having accepted appointment as Master of the Rolls. In the course of his judgment in that case, Lord Denning M. R. said (at pages 501-2): • "The reason why som. e peopl~ have thought that an award by English arbitrators must be i11 sterling is becaese they have regarded it as equivalent· to a judgment by an (1) [1973] 3 All E. R 498.

English judge which must be in sterling. ·But there is this difference. When commercial men are in dispute and go to arbitration, they wish to have the dispute resolved. They want a decision one way or the other. Once given, they abide by it, The losing party pays up. There is rarely . · any need to call in the sheriff or his officer to enforce the award. So it is perfectly fair; as between them, for the arbitrator to make his award in the currency which is appropiate to their dealings. But, when a plaintiff goes to a . court of law, it is, as often as not, because the defendant cannot pay or will not pay, The plaintiff wants to get judgment against him and, if need be, levy execution on his effects. This is so much iri the mind of the courts that • thay have ruled that they will give judgment · only in 'sterling. That is the one currency which is known to the court and to the sheriffs and their officers.

I venture to suggest that this'view of the courts should be open for reccinsideratio. n. If. the money payable under a contract is payable in a foreign currency, it ought to be possible for an English ·court to order specific performance of it in that foreign currency;. and then let the exchange be made . into sterling when it comes t6 be enforced. I know tha(this is not yet the law. There is high authority against it: see Re United Railways of Havana and Reg/a Warehouses. Ltd. But the House of Lords have since then held that specific performance ·can be ordered of a contract to make a money payment: see Beswick v. Beswick. (') This may point the way to a ralaxation of the old rule and enable the courts, in proper circumstances, to order payment in£o a foreign curreney, such as is suggested by Dr.. Mann in his book.

(') At any rate, there is no reason why tht rule about judgments of the courts should be extended to awards by · arbitrators, I think we should hold that arbitrators hav1 • jurisdiction to make an award in a foreign cur;ency whenever , that is the proper currency in which payments under the contract should be made; . (1) L. R. 1963 A. C,58; [1967] 2 All E. R. 1197. ·(2) The Legal Aspect of Money, 3rd Edn. (1971), p. 363. • .. FORA. SOL v. O. N. G. COMMISSION (Madon, J. ) 553 "The·next question is the manner of enforcing 'Such an award. It would, no doubt, be possible to bring an action on the award ~nd seek a judgment from the courts in sterling. ~n that case the rate of exchange would be taken at the date of the award. But another way is to seek the leave of the court under s.

26 of the Arbitration Act 1950 which says: 'An award on an arbitration agreement may, by leave of the High Court or a judge thereof, be enf"'°ced in the same manner as a judgment or order to the same effect, and where leave is· so given, judgment may be entered in. terms of the award. "If the words 'to the same effect' are read as meaning 'in the same terms', there would be some difficulty in applying this section to an award in a foreign currency, But I do not think they"mean 'in the same terms They only mean that the judgment or· order ·must have 'the same effect'. If the sum awarded is converted into sterling at the rate of exchnge at the date of . the award, it does have the same effect. The proper course is for the applicant to file an affidavit showing the rate of exchange at the date of the award and giving also the amount of the award converted into sterling. Then leave will be given to · enforce payment of that sum," (The emphasis has been supplied by us.

) - It may be mentioned that the defenants did not appear at any stage of the proceedings and were not represented and there. was no appeal to the House of Lords from this judgment. ,, Wheth. er we should accept the decision in the Jugosliivenska case as iaying down the correct rule to be applied so far as courts in this ·country are concerned is a matter which we will discuss aft&r completing our survey of English authorities. The question again arose before the ,Court of Appeal in. Schorsch•Meier G. m. b. H. v. flennin. (1) That w. as not a case of an arbitration but it was an ·action by a German company a~ainst an (l) p975) I All E. R. 15 , O. N. Cl. COMMISSION (Madon, J. ) 555 the money of account and the money of payment is a foreign. currency-the English courts have power to give judgment in that foreign currency, they can make an order in the form: 'It is adjudged this day that the defendant da pay to the plaintiff' so much in.

foreign curreny (being the currency of the contract)'or the sterling equivalent at the time of payment'. If the defendant does not honour ihe judgment, the plaintiff can apply for leave to enforce it. He shouldfile an affidavit showing the rate of" exchange at the date of the, application and give the a;,,ount of the debt converted into sterling at that date. Then leave 'will be given to enforce payment of that sum. (The emphasis has been supplied by. us. ) So far as the Treaty of Rome was concerned, the Court held that ihe · purpose of the said article 106 was to ensure that the creditor in one ... member State should receive payment for his goods in his own currency if it was the currency of the . contract without any impediment or restriction by reason of changes in the rate of exchange. Wit~ respect to the form . of the judgment, Lord Denning, with whom Foster J. concurred, held that he would ''adjudge that the debtor do pay to the plaintiff OM . \756.

03 or the sterling equivalen·t at the time of payment" meaning thereby, as Lord Wilberforce pointed out in the Miliangos case (at page 468), the date when the court authorizes enforcement of the judgment in terms of sterling. Lawton L. J. , the third member of the court, on the other hand, was of the opinion that the judgment should be in the from in which the plaintiffs bad asked for it, namely, in deutschmarks and the plaintiffs must be left to extricate themselves from th. e intricacies of the law relating to execution and exchange control. There was no appeal io the House of Lords against 'this judgment of the Court of Appeal. We now come to. the case of Mi/iangos v. George Frank (Textiles) Ltd. How that case reached the House of Lords makes interesting reading by itself. prior to the judgment being delivered in the Schorsch Meier case, Miliangos, a Swiss, brought an action against George Frank (Textiles) Ltd. , an English company, . claiming the sum of Swiss Francs 415, 522.

45 due to him for the price of polyester yarn sold and dilivered to the English company under a written. contract. The claim of the Swiss plaintiff was based upon invoices sent to the English company and accepted by that company S\JPREMll COURT REPORTS (1984] 1 S,C. R. and alternatively on two bills 9f exchange drawn in· Switzerland by the plaintiff and accepted by the defendants but which had been dishonoured on presentation on their ·respective Uue dates. " This alternative claim was for the . amou. nts of the said bills of exchange; namely, Swiss Francs 273, 619. 45 and Swiss Francs 27,394 respectively, and the cost of protesting the bills and interest. The plaintiff apparently had been advised _about the position in Il'nglish law and had accordingly claimed judgment in sterling as at the breach date. The defendants claimed that the plaintiff had committed a breaeh • of contract inasmuch as a part of the yarn dilivered to them was . .

unifit for the purpose and filed a counter-claim for damages. Thereafter; the plaintiff filed a second suit on anot-her contract in w,hich the· -c claim was ·on the same ,alternative counts. Both the a~tions were consolidated· and set . down for . hearing, but befor they reached· _. \. ·. hearing by their letter dated- November 22, 1974, the defendants aba. ndoned their defence and counter-claim and stated that they would submit to judgment. Four days later, on November 26, 1974, the Court of Appeal delivered judgment in the Schorsch Meirer case. n. Thereupon. the plaintiff amended the statement of claim in the first action and claimed the amount due in·Swiss Francs as an alternative to the claim in sterling. Bristow J. held . ·that the Schorsd1 Meier case so far as it related to countries . which Were not ·members of the·.

· Eur~pean Economic Community was obiter and had been decided per incuriam in that only one party had been represented and all the relevant authorities had not been cited. He further. held that the decision in that case was inconsistent with what the House of Lords had held in the Havana case and accordingly ·he gave judgment for the sum claimed in sterling. The pJaintiff went in appeai (Miliangaa v. George FJa~k (Textiles) Ltd. (') The Coun of Appeal held that the Sc/;orsch Meier case was not decided· per incuriam and was binding upon the trial court and gave judgment for ·the plaintiff in Swiss Francs. The English company went in appeal. to the House of Lords. We are not concerned with what was said in that case with . respect to whether the Schorsch Meier case was decided per incuriam • or not and whether an English court could depart from the rule in the Havana case..

Suffice it to say that the Ho'use of Lords by a majority (Lords Simon of Glaisdale dissenting) held that it was \_ legitimate for the House of the. Lords to depart from the "breach date conversion" rule and recognize that an English court was entitled to give judgment for a s'um of money ·expressed in a foreign • (! ) [197511 All E. R. 1076. .. FOR~SoL v. O. N. G. COMMISSION (Madon, J. ) currency in tke caso of obligations of a money character to pay foreign currency under a contract, the proper Jaw of waich was that of a foreign country, and wh~n the money of account was that of · that country or possibly of some cou11try other than the United 1~ Kingdom.

The Hou·se of Lords further held that the jnstability • ~ • which had overtaken the pound sterling and otlwr major currencies since its earlier decision in the Havana case as well as the procedures evolved in consequence thereof by the English ·courts , and by arbi· · trators in the City of London to secure payment of foreign -currency debts in foreign currency, justified departure from that decision in 1 ', terms of the Practice Statement (Judicial Pre~ed~nt)( } (under which the House affirmed its power to depart from aprevious decision when • • it appeared right to do so, recognizing that too rig_id an adherence to precedent might lead to injustice in a P. articular case and · unduly restrict tlie· development of the Jaw) sine~ a new and more satisfactory rule could be stated to enable the _courts to' keep step with commercial needs and would not involve undue practical ahd procedural difficμlties. We arc concerned here with what was said in that case with respect to' the date.

to be taken for converting foreign currency into -{ English currency. Lord Wilberforce held (at pages 468-9) that the claim should be made specifically for the foreign currency and to ) this might be added the alternative "or the sterling equivalent at the date of.. .... " and that as regards the conversion date to be inserted in the claim or in the judgment of the court, though the date· of judgment was a workable date, he would favour the date of payment ·meaning thereby the _date when the _court authori'l. es enforcement of the judgment in terms of sterling, because in some . cases, particularly where there was an appeal, the date ofjudgment might impose upon the creditor a considerable currency risk, Lord Wilberforce further observed (at page 469) : In the case of arbitration, there may be a minor discrepancy,_ifthe·practice whieh is apparently adopted (see the Jugoslavenska case (1974) Q. B.

292, 305) remains as it is, but I can see no reason why, if desired, thatpractice ' should not be adjusted so as to enable conversion to be J made as at the date when leave to enforce in sterling is given. u · . (The emphasis bas been suplied by us. ) (1) [19661 I W-L. R. 1234, • Lord Cross of Chelsea pointed out (at pages 497·8) that it would be absurd to have one rule with regard to arbitrations on debts expressed ·in·a foreign currency and . another with regard to actions on similar debts and that in a case where the defendant failed to deliver foreign currency for the payment of which the judgment was given, the date for its conversion into starling should be the date when the plaintiff was given leave to levy execution for a sum expressed in . '-.. sterling. Lord Edmund-Davies, referring to.

the Jugos/avenska case, said (at page SOI) that being governed by section 26 and sub-section (I} of section 36 (which deals with enforcement of foreign awards) of the Arbitration Act, 1950, the award of American dollars in that case of necessity had to be converted into sterling at the rate of exchange prevailing on the date when the_award was made and that but for that fact, the most just rate would be that prevailing when the award was being enforced, for the plaintiff bad been kent out of his money until then and there was no reason why this latter rate should not be'theone . adopted when judgments expressed in a foreign currency are befog enforced. According. to Lord Edmund-Davies, Miliangos should have been given judgment rnutatis rnutandis in the. form . approved of by Lord Denning M. R. in Schorsch Meier case, namely, that "it is this day adjudged that the defendant do pay to the plain· tiff 416,144.

20 Swiss francs or the sterling equivalent at the time of payment", which would mean, as pointed out by Lord Wilbeforce (at page 368), the date when the court authorizes enforcement of the judgment in terms of sterling, Lord Fracer of Tullybelton opined (at page 502) that to take the date of the commencement of the action might result in consequences as unjust as· taking the breach date because 'betwein the commencement of an action a period of a· year or more might easily elapse, allowing for appeals, before pay· ment was made and that the date of judgment would be better but there seemed no reason· why the latest practicable date, namely, the 1 date when the court . authorizes the enforcement or' the judgment should not be taken. Lord Simon of Glaisdale held in his dissen· ting judgment that there was no reason for departing from the rule . laid down in the Havana case and that this should only he done by Parliament on executive or. expert ad'vice.

With reference to the Jugos/avenska case Lord Simon observed (at page 489) : "If the sterling judgment rule and the breach date rule were to be reconsidered by a properly qualified body, • no doubt the Jugoslavehska case would come within its purview. " l'ORASOL v. O. N. G. COMMISSION (Madon, J. ) 559 The principle lilid down by the House of Lords In the Mi/iangos case was extended by it to include a claim based on damages for torts and for breaches of contract in its decision in Owners of M. V. Eleftherotria v, The Owners of M. V. Despina R-Thf Despina Rand . Services Europe At/antique Sud (SeasF of Paris v. Stockho/ms 1 Rederiahtiebo/ag Svea ofStockho/m,( ) better known as The Despina R, ·in two appeals heard one after the other and disposed of by common judgment. The first appeal arose out of a collision between two Greek ships, the Despina R and the Eleftherolria in which the latter was damaged.

The Eleftherotria was owned by a Liberian company which had its head office in Piraeus. The managing agents had their principal place of business in New York and the bank account used for moneys received and payments made on behalf of the owners was a U. S. dollar account in New York. An agreemenl w. as reached under the terms cif which the ow11ers of the Despina R were to pay to . the owners of the Eleftherotria 85 per cent or the ioss ond damage suffered as a result of the collision. The expenses . of repair bad been incurred in various currencies. The question whether the damages were to be paid in sterling or some other currency was referred to the Admiralty judge. Brandon J. held that he had ,urisdiction to award damages in a foreign currency, but that 'he w·as bound by authority to award them in the currency of expenditure. The Court of Appeal, dismissing an appeal by the own.

ers of the Despina R and allowing a cross appeal, held that here was jurisdiction to award damages in tort in sterling or in a foreign currency, an. d that, in the circumstances · . of the cas~, the appropriate currency was the plaintiffs' currency rather than the currency of the expenditure. ,'r The second appeal was in respect of a cargo of onions shipped to Brazil by the French ~barterers of a Swedisb-o wned motor ves~el, the Folias. The c~rgo arrived damaged, and the cargo receivers' claim for damages was settled. by the charterers in Brazilian cruzeiros - . which they purchased with French Francs,· their normal business currency. The hire under the charter'party was payable in U. S. dollars and the proper law of the contract was English law. In arbitration proceedings the owners admitted their liability to the charterers, but contended that paymem should be made in cruzeiros. By then the (I) L. R. (1979] A. C. 685. ..

value of the cruzeiro against the French Francs was half what it had been when the charterers had paid the cargo receivers. The arbitrators made their award in French Francs, On a special casestated Robert Goff J. held that the award should have been made in cruzeiros as being the currency of tlie loss. On appeal by the charerers the Court of Appeal restored the award of the arbitrators. · • ' The owners of the Despina R as . also the Swedish shipowners went in appeal to the House of Lords. Both the appeals were dismissed. The House 4eld·that in a claim based on tort, it was fairer . to give judgment in the currency in which the loss was sustained than in the sterling equivalent at 'the date of the breach or loss; that the principles to\e applied. in 'ascertaining the.

currency of the loss were those of restituio in integrum and reasonable foreseeability and, th~refore, where a plaintiff proved that lie conducted his business in a specific currency and it was reasonably foreseeable that he would ·. uhe that currency to purchase the necessary currency to meet the immediate and direct expendit'ure caused by the defe~dant's tort, then ·D judgment. •hould be expressed in the plaintiff's . currency and, accordingly, the Court of Appeal had properly varied the order from a judgment expressed in the currencies of expenditure to the currency of the business conducted on behalf of the· owners of the Eleftberotria, namely; U. S. dollars.

The following passage from the opinion of Lord Wilberforce (at pages 696-7)' is instructive : "I do not think that there can now be any doubt that given the ability of an English court (and of arbitrators sitting in this country) to giv~ judgment or make an award in a foreign currency, to give a judgment in the c~rrency in which the loss was sustained produces a juster result than one which fixes the plaintiff with a sum in . sterling taken at the date of the breach,or of the loss. " It -was farther held that where the terms of a ~on'tract governed by • English law· did not exprnssly or by jmrlication show that the parties had intended that. payments arising from a breach of contract were to· be paid in the currency of account or other named currency, the court should give judgment in the currency . that best expressed the party's loss;· that, although the appeal in the second case concerned a : .

chartcrparty which expressly stated that certain contrac1ual payments should be made in U. S. dollars, the terms of the charterparty did not • show . that payment for damage arising out of a breach of contract FORASOL ~. O. N. G. COMMISSION (Madon, J. ) 561 was to be made in that currency; that, arising from the owners, breach the charterers ha. d used French Francs to purchase the necessary cru~ zeiros to settle the receivers' claim and, in those circu)i:istances, the Court of Appeal had correctly affirmed the arbitrators' decision that the cu~rency that best expressed ihe charterers' loss was the . currency of their business, n. amely, Frerich Francs. With respect to the arbitra- . tors jurisdiction to iuake an award· in a fore. ign currency, Lord Wiliberforce said (at pages 702-3); "In my opinion a de~ision in what c~rrency the loss was borne or felt can be expressed as equivalent to finding which currency sum appropriately or justly ref! bcts the recoverable ·1oss.

This is essentially a matter for arbitrators to determine. A rule that arbitrators ·may make their award in the curreney best . suited to achieve an appropriate and just result should be a flexible rule in which a~count must be taken of the circumstances in which the loss. arose, in· which the loss was convertea into a money sum, and in which it. was felt by the plaintiff. In . some cases the '. immediate loss·· currency may be appro· 'priate, in others the . currency ii! which it was borne by · the plaintiff. There will be still others in which the appropriate currency is the currency of the cont~act. Awards· of arbitrato. rs besed npon their appreciation of the circumstances in which the foreign currency came to be provided should not be set aside for, as such, they involve no error of'Iaw.

" It will also be useful to refer at this- stage to certai11 Practice 1 Directions( ) given, following upon the Mi/iangos case, witli respect to clain1s and judgments in foreign currency and enforcement of such judgments. The Miliangos case was decided on November 5,i975,and the Practice Directions in question were issued by the Senior Master of the Supreme Court· of Judicature (Queen's Bench Division) on December 18,1975, with the concurrence of the Chief Chancery Master acting on the authority of'the Vice'Chancellor so far as they applied to the practice ill the Chancery Division, and of the Senior Registrar of the Family Divison·. so far as thoy applied to the practice . in that Division. As pointed out in Halsbury's Laws of England,-4th (I) [1976) I W. L. R. 83 [1976] I All E. R. 669. • ed. , vol. 37, para. 12, practice . directions "provide directions as to matters of practic@ and procedure for the assistance and auidance of litigants in .

the conduct of their proceedings,arid in the administration of civil justice generally, and, although they lack the force of law they are of enormous value, to the courts, to practitioners and to all . who are invotvd in the civil judicial process". Under the Practice Directions dated December 18,1975, mentioned above, before a writ R of summons i• issued in which the plaintiff makes a claim for a debt or a liquidated demand expressed in a foreign currency, the writ must be endorsed with acertificate signed by or on behalf of the solicitor of the plaintiff. or by the plaintiff, if he> is acting i. n person, certifying • the rate current in London for the purchase of the unit of the foreign . c currency claimed at the clo~e of business on the date next or most · nearly preceding the date of the·~ssue of the writ and stating whether ' at that rate of exchange the debt or liquidated demand claimed in the writ amounts to"£..

or exceeds£ 650 (as the case may be)", This certificate is required for the purpose of asceratining the proper amount of the costs to be endorsed on the writ. The judgment which would be entered in respect 9f such a claim would show that it has been adjudged that the defendant, do pay the" plaintiff the sum in foreigh currency for which tile court h. as · ordered judgment to be entered or its sterling equivalent at the time of payment. Where a defendant desires l rt or breach of contract. It. was furth~r held that in the case of' arbitrations it was for the . - ) ... arbitrators to determine in what currency the loss ' . 'was borne or felt and that the rule that arbitrators may make their award in the currency best suited to achieve an appropriate and iust result. should be a • . ' . : .. llexjble rule in~which regard should be had to the .. -· FORASOL v. o. N. G. COMMISSION (Madon, J. ) 567 circumstances in which the loss arose, in which tl;te .

A loss was converted into a money sum, and in which it was felt by the plaintiff. . ·" ~ (12) So far as practice and procedure is concerned, under the Practice Directions dated December 18, 1975, for. the purpose of ascertaining the proper . amount of the costs to be endorsed on the writ of summons • the plaintiff's solicitor or the plaintiff, if he is acting in person, is to certify the rate of exchange current in London at the close of the business on the date next or most nearly preceding the date of the issue of the writ and to mention the sterling equivalent at the . rate of the sum in foreign currency claimed in the action. The judgment is to be entered for the sum · in foreign currency adjudged by• the court to be payable by the defendant to the plaintiff or its ster· ling equivalent at the time of payment. None the less if a judgment is to .

be enforced by execution, the application for execution is to state the rate of exchange current in London on the date nearest or most nearly preceding the date when the application is made. We have spent some time in ascertaining the English law on the subject by reason of the absence of any authority of any Indian court on this point and because the learned Single Judge has based his decision on the Mi/iangos c~se while the Division Bench of the Deihl High Court has based its on the Jugoslavenska case. Further, the English decisions referred to by us are of courts of a country from which we have derived our jurisprudence and a large part of our laws and in which the judgments were dilivered by judges held in high repute. Undoubtedly, none of these decisions arc binding upon' this Court but they are authorities of high persuasive value to which we may legitimately. tqrn for assistance.

Whether the rule laid down in any of these cases can be applied by our courts must, however, be judged in the context of our own law and legal proce- ) dure and the practical realities of litigation in our country. When a foreigner has to receive a sum of money which should· justly be > payable to bim in a foreign currency and, because of 'the default of the paying party, seeks to recover its payment through tbe court, the first qu_~stion wllich arises is whe~b,er a qourt in fndia would hav~ jurisdiction to. pass a decree for a sum expressed in a foreign currency. Though on principle there is no reason why a court should not be able to do so, no court can pass a decree directing a . defendant to do an impossible or an illegal act and in view of the provisions of our Foreign Exchange Regulation Act, 1973, and the restrictions containe - • our country, it is th~ misfortune of litigants that· by reason of ever'increasing volume of litigation, .

overcrowded · court dockets and ~ ou11dcrmaniled courts, suits· are often not. disposed of for an unconscienably long ti. me and if we take into account ·the time that would · 6e spent in appeals, further apJ)eals, and revision· and review appli- ·cations which may be filed, the longevity of the litigation is doubled if hot tripled, so that none can with any ·certainty predict even ; probable date for its termination. The selection of the date of the filing ofthe suit would, therefore, leave . the parties in as un~ertain and precarious a position as the selection of the date when th~ amount became payable or the "breach date", We will now consider the feasibility of selecting the third date, namely, the date of the decree. A decree crystallizes the amount payable by the defendant to the plaintiff and it is' the decree which entitles the judgment-creditor to recover the judgment debt through the processes of law. An .

objection which can, however, be taken to selecting this date is that the dee. roe of \he trial court is nbt the final decree for there may be appeals or other· proceedings against it 'in superior courts and by the time the matter is finally determined, the rate of exchange prevailing on that date may be nowhere near that which prevailed at the date of the decree of the trial court. To select the date of the decree of the trial court as the conversion date would, therefore, be to adopt as unrealistic a standard as the • breach date". This difficulty is, however, easily overcome by· selecting the date when the action is finally disposed of, in the sense that the decree becomes final and binding between the parties after all remedies against it are exhausted. This earl be achieved by the· court which hears the appeal providing that the date of its decree or other proceeding in which the decree is challenged would be the date for D.

conversion of the foreign currency sum into Indian rupees in cases ·where the decree has not· been executed in the meantime. The real ~bjection to selecting this um expressed in Indian currency. What is being is executed is the decree and the sum for which execution is to issue in a money decree must, therefore, be for the particular sum specified in the decree, that is, the judgment debt. It-cannot be for a sum which would be determined and fixed by the executing court. at the time of granting the execution application, for under o. 21 r. 11(2) (g) of the Code of I Civil Procedure, 1908, an application for e~ecntion has to state "the a~ount with interest (if any) due npon the deeree". -The above difficulties would rule out the1 taking of the date when the court gl'ants an. application for execution as the date of • . . . . ~ . conversion and would make inapplicable to our couris the rule laid down in the Mi/iangos £iise. • As regards the selection by the court ·of the .

date of payment as the proper date of conversion, -that was the date taken in the ~\·.. Scliorsch Meier case; but as Lord Wilberforce pointed out. (at· page 468) in the Mi! iangos case, tliis only ineans the date when the. court authorizes enforcement of the'judgment in. terins of sterling. As we have seen, in England, acNrding to the Practice Directions dated December 18, l975, the form. of'the judgment to be entered requires the defendant to pay the sterling equivalent of the. foreign currency sum adjtttlged at the time of payment. This would be the most logical date and one which does justice to a pfaintiff who has come to court to recover a sum of money· payable to him in a foreign . currency... If the principle to be applied is ihat . the plaintiff should be put in the same position in which he would have ·been had the defendant discharged his obligation on the. due date; then that princi· pie is best. served by the court taking the date of payment as the date of conversion.

· In adopting this date we, however, find ourselves · · faced with three practical and procedural difficuliies, na,mely, payment of court·fees, the pencuniary limit of the jurisdiction of courts ~nd execution. So far as court~fees · are ·concerned, we. have a 'central Act, namely, the Court-fees· Act, 1870 (VII of 1870), ~ich applies, either with or withotit amendments, to those States and Union Territories which have not repealed and replaced it . by ·their own legislation. The States and Union Territories which have their own ·legislation e>n the subject are'Andhra· Pradesh, Gujarat, Himachal Pfadesb, Jammn and Kashmir, Karn'ataka, Kerala, Maharashtra, Pondicherry, - Rajasthan, Tamil Nadu and West Bengal. Under' au Court•fees ' .... Acts, no plaint can be fil~d in any courtwithout payment of court· fees. The plaintiff, therefore, has to value his claim in the suit and pay the court-fees thereon comput;d in the manner provided in the )I relevant Conrt-fee,s Act. So far as inoney !

uits are concerned, the court-fee·s payable are ad valorem conrt·fees according to the amount claimed which may or may not be subject. to . a ceiling . depending · upon which Court·fees·Act applies. A suit for a sum of money expressed in a foreign currency is also a money suit and the plaintiff ! n snch a snit will have to pay court·fees according to the amount claimed. As, however, a court in India cannot, as we have pointed out above, pass a decree simp/iciter for payl)lent of a sum in a foreign currency in such a suit, the plainti. ff will have to make an· alternative . ' . FORASOL ~. o. N. G. COMMissION (Madon; J. ) claim in his pJaint for the rupee equivalent of the foreign currency sum claimed. He will, therefore, have to pay court-fees on the amount of the rupee equivalent. Such rupee equivalent as at the date of the institution of the suit can only be at the rate of exchange prevailing on that date.

If;therefore, a plaintiff were to make the alternative claim on the basis of the rupee equivalent at the time of payment, the value of the suit for the purposes of court-fees would be incapable of computation for it would not be possible to say what the rate of exchange on that date would be. It may be argued on • the analogy of asuit for"accounts or for partition or for adminis· tration or for win. :\ing up'and accounts of a partnership that the plaintiff can put a tentative valuation in his plaint computed according to the rate of \exchange prevailing on the date ,of°the· institution of the suit and give an undertaking to pay the deficit court-fees if at the time of payment of the amount. decreed, t11e rate of exchange has fluctuated in his favour so,that the amount-realized in rupee equivalent is more than the amount m~ntioned in the plaint. There is, however, a basic difference between a money suit and a suit" for accounts, a partition suit, an administrati.

on suit or a partnership suit. . Jn these types of suits, a preliminary decree is passed to ascer· tain the amount due to the plaintiff and when such amount is ascertained; a final decree for the ascertained sum is passed. In money, suit, however, there can be only one decree. I( is, therefore neither permissible in law nor feasible for the plaintiff in a suit ·in which his claim is for a sum of money in a foreig! ' currency to give an undertaking to make good the deficiency in court-fees when he receives payment. In fact, a part or even the whole of the j~dgment . debt may not be recovered at all. Even in the other types of suits. mentioned'above, it is not when the ascertained amount is received by the plaintiff that. the deficit court-fees are to be paid by him: They are·to be paid when the amount due to · the plaintiff is ascertained. In the type of suits we are concerned with in . these appeals, the plaintiff can a!

the highest give an undertaking to pay the deficit; if ariy, in the court-fees if at the time when the judgment is· given and the decree passed, the rup. ee equivalent is more than at the date of the suit by reason of the fluctuation in the rate of . exchange, but it , would not be permissible for him to give such an undertaking for any date subsequent to the date of the passing· of the decree. ' An additional ·difficulty would be that it is the court in which a suit is instituted which has to 'ensure at the ·time of the institu· . tion of the. suit' that the proper court-fees have been paid. The deficit court-fees, theref9re, cannot be calculated and the balanee. • 574 SUPREME COURT ruiPOl\TS (1984) 1s. c. Il thereof recovered by the executing court. These difficulties would rule out both the date when the court orders execution to issue and the date of payment of the decretal debt. to be taken as the date of conversion. . ___, \. These difficulties do not arise in England.

Under the English law, the Lord Chancellor has power, with the consent of al" least three Judges of the Supreme Court of Judicature and the concurrence of the Treasury, to fix fees to be taken in the High Court and the Court of Appeal (see Hillsbur. y's Laws of England, 4th ed. , vol. 10, para. 908). In the exercise of this power, Supreme Court Fees Orders have been made from time to time. The order currently in force is the Supreme Court Fees Order, 1980 (S. , I. . 1980 No. 821), under which the fee payble in the case of a writ endorsed with a claim for a Hquidated sum·not exceeding £ 2,000 is_£ 35 and in any other ·case it is £ 40, civil proceedings in England beiug commenced by issuing a writ. Thus, in England, a fixed court-fee is payable, the amount thereof varying dependant only upon whether it is an action for a liquidated sum not exceeding £ 2,000 or not.

In England, therefore, as the court-fees payable are not ad valorem court-fees in an action to recover a sum of money exp~essed in a foreign currency, it _w<>uld be immaterial for the purposes of court-fees whether the plaintiff , claims in the alternative the sterling equivalent of that amount as at the date of the judgment or as at the date when the court gives leave "E to enforce the judgmen\ or as at the date of payment because in any of these cases, the court-fees payable by the plaintiff will not vary except where by reason of the fluctuation in the rate· of exchange the amount adjudged or the amount for which leave to enforce the judgment is given or the amqunt paid exceeds £ 2,000 in a case where less than that bas been claimed in the action. It should be noted that English practice also recqgnizes the difficulty which would be · .

encountered in issuing execution for a sum in sterling to be determined at the date of payment or realization and accordingly the Practice Directions