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Relevant date for determining the foreign exchange rate applicable to an arbitral award : High Court of Delhi

The exchange rate as applicable on the date when the petition of challenge to an arbitral award is dismissed, will be the relevant date for ascertaining the exchange rate applicable for determining the INR equivalent to the amounts awarded in foreign currency. This was held in VOITH HYDRO LTDA & ORS v. NTPC LIMITED[OMP (ENF.) (COMM.) 64/2018] in the High Court of Delhi by single bench consisting of HON’BLE JUSTICE VIBHU BAKHRU.

Facts of the case are that an arbitral award was passed in the context of dispute between the parties in connection with an agreement for execution of a Hydro Electric Project. Compensation was awarded in favor of petitioner with interest. Respondent filed petition under S.34 and a SLP to set aside the Award, both of which were dismissed.

Learned  Counsel appearing for decree holder submitted that NTPC had paid an amount the shortfall of 12,09,16,391.27 which was primarily due two reasons, incorrect reliance on the exchange rate, NTPC erroneously deducted tax deducted at source(TDS) and was also liable to pay charges incurred by them for extending the Bank Guarantees.

Counsel for decree debtor contended the award amount was correctly paid. Voilth was required to open Escrow Account and obtain specific approval from RBI which they delayed. The exchange rate was consented and accepted in Indian currency in Escrow Account. Payment of TDS and any extra charges will be unfair.

The High Court referred to the precedent laid down in Forasol v. Oil and Natural Gas Commission, wherein the Supreme Court had held that, “The exchange rate prevalent on the date on which the decree is passed would be the applicable exchange rate. It further clarified that if the decree is challenged in an appeal and such appeal is decided wholly or in part, the exchange rate prevailing on the date on which the decree or order is passed, would be applicable. Insofar as the arbitral awards are concerned, the date on which the challenge to the arbitral award is finally rejected, would be the date for determining the foreign exchange applicable to an award made in foreign currency.”

Court also referred to the decision of the Supreme Court in All India Reporter Ltd. v. Ramchandra D. Datar wherein it was held,“when amounts becomes part of a judgment-debt, they lose their original character and assume the character of a judgment debt. Once such an amount assumes the character of judgment debt, the decree passed by the civil court must be executed subject only to the deductions and adjustments permissible under the Code of Civil Procedure.”

Considering the above mentioned precedents and facts of the case court held, the relevant date for ascertaining the exchange rate will be date of rejection of SLP and directed that NTPC be credited to the extent TDS was deducted and deposit it to decree holder. Considering Voith had voluntarily furnished Bank Guarantees, reimbursement of bank charges was rejected.

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