The enforcement of Foreign Arbitral Awards in India is governed by the provisions laid down in the Arbitration and Conciliation Act,1996 as well as the Code of Civil Procedure,1908. The procedure for enforcement of such Awards is contained in Part II of the Act. The enforcement of such Awards is carried out as per the rules of the New York Convention or the Geneva Convention as applicable.
Foreign Arbitral Award
Foreign Arbitral Awards are outcome of cross border arbitrations held outside India and the Awards passed in such proceedings are sought to be enforced in India. The Act defines the Foreign Awards as the Awards being passed in the proceedings arising out of commercial contracts between an Indian entity and a foreign entity. The Arbitration Agreement between such entities are required to be in line with the provisions as laid down in the First Schedule of the Act.
Conditions for an Award to be Treated as Foreign Arbitral Award
- The Arbitration proceedings should arise out of contract executed with a Foreign Entity
- The Arbitration must be held in a Foreign Country.
- The Arbitrators must be Foreign Nationals.
- Foreign Laws should apply to the arbitration proceedings.
Process for Enforcement of Foreign Arbitral Award
The process for enforcement of Foreign Arbitral Awards is carried out in two steps:
- To ascertain if the Award in question fulfils the requirements of Section 47 of the Act or not. The same shall be done upon filing an Execution Petition before the competent Court.
- Once the Court is satisfied that the requirements for the enforcement of such Award as per the Act are met, the Award shall be enforced in the same manner as a decree obtained from a civil court.
Appropriate Forum for Enforcement of Foreign Arbitral Award
The High Court within whose jurisdiction the assets are situated shall be the appropriate Forum for filing the Execution Petition seeking enforcement of the Arbitral Award arising out of a money dispute. The cases wherein the subject matter is not money, the Commercial Division of High Court where such subject matter lies would be the appropriate jurisdiction for enforcement of Arbitral Awards.
Foreign Currency Exchange Rate Applicable in Case of Enforcement of Foreign Arbitral Award
The Act though deals with the way the Foreign Arbitral Award shall be enforced. However, concern regarding the foreign currency exchange rate applicable on the said Foreign Awards enforceable in India remained unsettled until the Hon’ble Supreme Court recently dealt with the said concern in its judgment namely DLF Limited vs. Koncar Generators and Motors Ltd.
Brief Facts of the Case
DLF Ltd. (DLF) an Indian Company and Koncar Generator & Motors Ltd. (Koncar), a Croatian company, entered a Contract under which Koncar was required to manufacture, design, engineer and supply 2 (two) generators to DLF Ltd. However, certain disputes arose out of the said Contract which were referred for arbitration to the International Chamber of Commerce, Paris in terms of the Arbitration Agreement. An Arbitral Award dated 12.05.2004 came to be passed in favour of Koncar under the Arbitral Award, DLF was required to pay a sum of Euros 16,73,469.07 including interest to Koncar.
While Koncar filed for enforcement of the Arbitral Award before the Executing Court in India, DLF filed a petition under Section 34 of the Act. The said petition was dismissed on 28.04.2010. DLF then filed Objections against the Award under Section 48 of the Act as well as a petition under Section 37 of the Act. The Section 37 petition was dismissed as withdrawn by the High Court on 15.10.2010. DLF and Koncar agreed on the following:
A. DLF agreed to deposit a sum of Rs. 7.5 Crores before the Executing Court on or before 08.11.2010. (which was deposited on 22.10.2010).
B. Counsel for Koncar agreed that Rs. 7.5 Crores to be deposited by DLF would be released upon furnishing a Bank Guarantee of a scheduled bank of India amounting to Rs. 7.5 Crores in favour of the Executing Court, Koncar further agreed that the said Bank Guarantee would be kept alive during the proceedings under Section 48 and for a period of 60 days thereafter.
The Objections filed by DLF under Section 48 of the Act also came to be dismissed on 02.04.2011. Pursuant to which DLF filed a revision petition before the High Court.
DLF was directed to deposit an additional sum of Rs. 50,00,000/- with the Executing Court which was deposited on 15.07.2011. The Revision was dismissed and as such the Arbitral Award attained finality on 01.07.2014.
The Executing Court allowed Koncar to withdraw the amount deposited by DLF along with interest accrued vide its Order dated 24.08.2016. Koncar received a total amount of INR 11,60,12,100 on 10.10.2016. The Execution Petition was subsequently allowed on 03.02.2017, with a clarification that the relevant date for conversion of foreign currency shall be 01.07.2014 i.e., the date on which the Arbitral Award attained finality. The Order clarifying the date of conversion of foreign currency was challenged by DLF which was rejected. DLF than approached the Hon’ble Supreme Court in SLP.
Issues Settled in the said Judgment
a. What would be the appropriate and correct date for determining foreign exchange rate for converting the sum of Award granted in Foreign Currency to Indian rupees?
The appropriate and correct date for determining the foreign exchange rate for converting the sum of Award shall be the date on which the Award has attained finality.
In the case mentioned herein above the appropriate date for conversion was decided to be 01.07.2014, i.e. the date on which the Award attained finality.
b. What would be the date of conversion in cases wherein the Award Debtor deposits some amount in the Court before which the proceedings challenging the Award are pending?
The Hon’ble Supreme Court has held that the date of conversion in cases wherein some amount has been deposited shall be applicable as on date on which such amount has been deposited by the Award Debtor. Even if the amount is not withdrawn by the Award Holder subject to fulfilling the conditions laid down by the Court for such withdrawal.
In the present case the conversion rate on Rs. 7.5 Crores was to be calculated as on the date on which the said sum was deposited i.e. 22.10.2010. The conversion rate on Rs. 50,00,000/- shall be calculated as on 01.07.2014, i.e. the date on which the Award has attained finality, since the Executing Court had stated that the said amount can be claimed by Koncar upon conclusion of Execution Proceedings.
Conclusion
In view of the above, exchange rate shall be applicable for cases wherein the directions have been given for depositing money, as on date on which the said amount is deposited irrespective of the fact as to when is the same being withdrawn by the Award Holder upon complying with requirements as directed. Secondly, on the date on which the Award attains finality.
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