Statutory interpretation

The Supreme Court emphasised that unlike the Arbitration Act, 1940, the 1996 Act does not require a separate court decree for a foreign arbitral award to become enforceable. Instead, under Section 49 of the Arbitration Act 1996, a foreign award is automatically deemed a court decree upon the final determination of any objections raised against it, thereby attaining finality. This interpretation underscores the significance of the objection resolution process in determining the enforceability date.

Applicability of Forasol

The Court addressed the High Court's view that the principle established in Forasol v. ONGC was not applicable to cases under the 1996 Act. The Supreme Court firmly rejected this view, affirming the continued relevance of Forasol's core principle: the exchange rate should be fixed based on the date the award becomes enforceable. The Court recognised that while the procedural mechanisms for achieving enforceability may differ between the 1940 Act and the 1996 Act, the underlying principle of using the enforceability date for exchange rate conversion remains valid and applicable.

Treatment of deposited amounts:

The Court provided detailed guidance on handling deposited amounts, drawing parallels with its decision in Renusagar Power Co Ltd v. General Electric Co. It held that when the award debtor deposits an amount with the court, and the award holder is allowed to withdraw it, even if such withdrawal is conditional, the deposited amount must be converted using the exchange rate prevailing on the deposit date. This approach acknowledges that the award holder gains access to and potential benefit from the deposited sum upon deposit, even if subject to certain conditions.

Rationale for deposit conversion date

The Court's decision to use the deposit date for conversion in cases where the award holder can access the funds aligns with the principles embodied in Order 21, Rule 1 and Order 24 of the CPC. These provisions aim to prevent the award debtor from being unjustly penalised by having to pay interest on amounts already deposited. By using the deposit date for conversion, the Court recognised the award holder's ability to utilise the deposited amount and potentially benefit from exchange rate fluctuations.

Analogy to interest rules

The Supreme Court further strengthened its rationale by drawing an analogy between the treatment of deposited amounts in the context of exchange rate conversion and the rules governing interest calculation on such deposits. Just as interest ceases to accrue on a deposited sum once the decree-holder can access it, the exchange rate should be fixed at the point where the deposited amount becomes available to the award holder. This analogy highlights the importance of fairness and preventing unjust enrichment by considering the actual benefits derived by the parties from deposited funds.

Distinguishing deposits based on withdrawal

The Court recognised the need to differentiate between deposits that allow for immediate withdrawal by the award holder and deposits where withdrawal is contingent on the final outcome of the objections. In the case of the former, as with the initial deposit of ₹7.5 crore, the Court held that the deposit date should be used for conversion. This is because the award holder could immediately access and benefit from the funds. However, for deposits like the subsequent ₹50 lakh, where withdrawal was conditional on the final resolution of objections, the Court determined that the exchange rate should be applied as of the date the objections were definitively settled. This distinction ensures a more equitable outcome by considering the actual availability and potential utilisation of the deposited funds.

[CLAT 2023] Last date for online application extended to November 18