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Forasol Vs. Oil and Natural Gas Commission - Court Judgment

LegalCrystal Citation
SubjectContract
CourtDelhi High Court
Decided On
Case NumberExecution Appeal No. 77 of 1976
Judge
Reported inAIR1978Delhi35; ILR1977Delhi501
ActsArbitration Act - Sections 17
AppellantForasol
RespondentOil and Natural Gas Commission
Advocates: S.B. Ghosh,; D.N. Gupta,; J.K. Mehra,;
Cases ReferredMiliangos v. Geo. Frank
Excerpt:
conflict of laws--decree--payment of sum money--contract stipulating payment in french currency--jurisdiction to order payment of sum expressed in foreign currency--whether court can execute the decree for sum expressed in french francs--date for conversion. ; that when someone is under an obligation to pay, under a decree of the court passed on award, a sum of money expressed in a foreign currency but to pay it in this country (india), the person under the obligation has an option, if he is to fulfill his obligation at the date when the money is payable, either to produce the appropriate amount in the foreign currency in question (french francs in this case) or to pay the equivalent in indian rupees at the rate of exchange prevailing at the due date. the date of enforcement of the.....avadh behari rohatgi, j. (1) in a world of interdependence and international markets foreign money and devaluation are raising problems both difficult and urgent for judges and lawyers. the case is concerned with one such question. (2) on july 30, 1962, the government of india called for global tenders for drilling for the exploration of oil in jaisalmer desert in rajasthan. farasol of sevres (france) were one of those who tendered. their tender was accepted by the government of india. after some correspondence between the parties a contract was signed en february 17, 1964 called 'a structural drilling agreement' between oil and natural gas commission (ongc) and forasol with regard to the work of drilling for the exploration of oil. (3) initially the duration of the work under the.....
Judgment:

Avadh Behari Rohatgi, J.

(1) In a world of interdependence and international markets foreign money and devaluation are raising problems both difficult and urgent for judges and lawyers. The case is concerned with one such question.

(2) On July 30, 1962, the Government of India called for global tenders for drilling for the exploration of oil in Jaisalmer desert in Rajasthan. Farasol of Sevres (France) were one of those who tendered. Their tender was accepted by the Government of India. After some correspondence between the parties a contract was signed en February 17, 1964 called 'a Structural Drilling Agreement' between Oil and Natural Gas Commission (ONGC) and Forasol with regard to the work of drilling for the exploration of oil.

(3) Initially the duration of the work under the contract was stated to be for a period of one year. But the contract provided for extension beyond the period of one year. As war between India and Pakistan broke out in September 1965 the work could not be completed. Operations had to be suspended. Time under the contract was extended. The last period extended was up to April 30, 1967.

(4) During the currency of the period of extension disputes arose between the parties. The contract provided for arbitration. That clause reads: -

'IN case any dispute should arise in connection with or in the carrying out of this contract which cannot be resolved by the parties themselves, the parties agree to refer the dispute to arbitration, proceedings of which will be held in India..............'

(5) The parties appointed their respective arbitrators in terms of the clause. The arbitrators allowed their time to expire without making an award. They referred the matter to Mr. Justice N. Rajagopala Ayyangar, retired judge. Supreme Court of India as an umpire.

(6) The Umpire entered upon the reference on March 8, 1972. Before him Forasol submitted their claim against ONGC. Ongc in their turn made a counter-claim against Forasol. After protracted proceedings the Umpire made his award on December 21, 1974. It is a bulky award which runs into more than 160 pages. The Umpire awarded certain sums to Forasol. He also awarded some sums to ONGC.

(7) On February 22, 1975 Ongc made an application to this court under s. 17 of the Arbitration Act praying that the award of the Umpire be made a rule of the court. Forasol did not oppose, the application. On May 7, 1975, the award of the Umpire was made a role of the court. A decree was passed in terms of the award. The decree awarded interest at the rate of 6 per cent per annum from the date of the decree till payment.

(8) On October 8, 1976, Forasol made an application for execution claiming that they were entitled to recover from Ongc under the award Rs. 11,10,780. Ongc dispute the claim. They have filed their objections. It is this matter which has come before me for decision.

(9) It is not disputed that under the Umpire's award Ff 21,11,704.01 are due to Forasol from ONGC. In the statements submitted by the parties this is an agreed figure. It is also not disputed that Ongc are entitled to recover from Forasol a sum of Rs. 10,19,380.39 which Ongc paid to the income-tax authorities on account of income- tax due from Forasol. This amount admittedly Ongc are entitled to adjust. Forasol are prepared to give credit for this amount. Besides this there are three other items which Ongc claim from Forasol to which I shall come a little later.

(10) What is the dispute between the parties now that the award has been made by the Umpire. In order to understand the nature of the dispute it is necessary to refer to an important term of the contract which provided for currency of payment. This clause reads:

'IX.3Currency of Payment. IX-3-1. The operational fee, standby fee and equipment charges payable to Forasol have been specified in French Francs in Articles IX-1.1.1. to IX-1.1.10. above. The amount payable to Forasol on account of aforesaid fees and charges shall be computed in French Francs. Ongc shall pay 80 per cent of the aforesaid amount in French Francs and the remaining 20 per cent in Indian Rupees using a fixed conversion rate of Ff 1.033- Rs 1.000.'

How do we construe the clause The obligation to pay fees is to be measured in terms of French francs. On this the contract is clear and unambiguous. The money of account is only the French currency. This is the currency of the contract. This is the money of measurement. The substance of the obligation is expressed in French currency. The clause says:

'THE amount payable to Forasol on account of aforesaid fees and charges shall be computed in French francs'.

(11) The money of payment is French francs so far as 80 per cent of the French currency is concerned. The remaining 20 per cent is to be paid in Indian rupees. For this 'a fixed conversion rate' is provided.

(12) This means that fees are to be ascertained in French francs. In so far as 80 per cent is concerned the money of account is identical with the money of payment. It is the French currency. And thereforee an exchange operation is avoided. This is the basic fact to remember. As regards 20 per cent of the currency of account the French francs had to be translated into the currency of India by a fixed rate of conversion (FF 1.033=Rs. 1.000). This' involves an exchange operation for which the rate is fixed. The media of payment are French francs and Indian rupees. On a proper interpretation of the contract this appears to me to be the setting of the transaction. It is in this financial environment that the transaction has to be viewed.

(13) The Umpire has made his award on the claim and the counterclaim in French francs and Indian rupees. He has given a summary of his award at p. 152-153 which has to be read with the errata at p. 157A to 157E.

(14) During the currency of the contract an important event happened. On June 30, 1966 the Indian rupee was devalued. Forasol put forward before the Umpire a claim that after devaluation of the rupee there should be a change in the rate of exchange. The Umpire was impressed by the argument of Forasol. He, thereforee, enhanced the rate of exchange. He directed that from November 30, 1966 the 'rupee portion' should be converted at Ff 1 = Rs. 1.5178 or Ff 1000 =-- Rs. 1,517.80. At page 157-C of the award he said:

'MESSRS Forasol have put forward before me a claim for enhanced rate of interest and their claim is that this should be 1.5178 for every Ff or Rs. 1517.80 for every Ff 1,000. I find that there is considerable correspondence in the course of which they have made a claim that after devaluation of the rupee there should be a change in the rate of exchange. Though there is no specific 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 converted at FF. 1 = 1.5178 or Ff 1000-Rs. 1,517.80. Of course this rate of exchange would apply to both the partics, Forasol and the O.N.G.C.'

(15) So far as the 'rupee portion' of the award is concerned there is no difficulty. The Umpire has fixed the rate of exchange. Instead of Ff 1.033 = Rs. 1.000 the rate of exchange was varied to Ff 1 - Rs. 1.5178. This was obviously done to do justice to Forasol who complained that they were suffering greatly because of the devaluation of the rupee. The Umpire uplifted the Indian rupee to make up for devaluation.

(16) Now the dispute is about that portion of the award which is in French francs. Forasol claim that they are entitled to payment in French francs. Under the award they claim that Ff 14,41.354.33 are due to them and they must receive these French francs. In the alternative the rate of exchange prevalent on the date of the degree (May 7, 1975) should be adopted as the rate of exchange for conversion of French francs in Indian rupees. On that date the rate of exchange was 1 Ff = Rs. 1.938. The chief issue for decision is: What should be the date of conversion of French francs into Indian rupee

(17) How much of Indian rupees would be required to purchase in France the amount of foreign currency (FF) due to Forasol The arbitral award of the Umpire is in foreign currency. He has awarded to Forasol fees out of which Ff 8,77,750.36 are now remaining due as the balance of their claim and Ff 12,88,185.35 on account of interest up to June 10, 1974 because Ongc were found by the Umpire to be in default of payment. They had made default in their contractual obligations (not paying French francs as they had agreed to do). This figure of Ff 21,65,935.71 is due to Forasol under the award. On the other hand, Rs. 10,19,380.39 are due to Ongc on account of income-tax. They arc entitled to adjust this amount against French francs due to Forasol.

(18) More than ever before are exchange rates volatile. Constancy is no longer the virtue of modern currencies. They are all marked by violent fluctuations. They all have mercurial twists of temperament. Devaluation has ceased to have opprobrious association of a century ago, probably because there arc very few, if any, currencies that have been immune from its impact. As Lord Denning put it with characteristic vividness:

'(STERLING)was a stable currency which had no equal. Things are different now. Sterling floats in the wind. It changes like a weather-cock with every gust that blows. So do other currencies.'

(Schorsch Meier (1975) Qb 416).

(19) How the Indian rupee has devalued since June 1966 will be apparent at a glance from the following table: Contract rate on - Ff 1.033 = R S.1.000 February 17, 1964. Rate fixed by the - FF1 = Rs. 1.5178 Umpire for rupee portion. . Rate at the date of - Ffi = Rs. 1.831 the award i.e. December 21,1974. Rate at the date of -FF1 = Rs. 1.938 Decree i.e. May 7, 1975

(20) Forasol have filed an affidavit dated July 18. 1977 stating the rate of exchange based on the information furnished by the State Bank of India.

(21) Now the currency of the contract is French francs. That is the currency of the account and the currency of payment so far as 80 per cent of the fees are concerned. An Indian Umpire has made the award in foreign currency, His award in foreign currency has to be converted into Indian rupees in order to enforce it. What should be the date of conversion What should be the rate of exchange at which the Franch franc is to be converted into Indian rupee These are crucial questions.

(22) Counsel for Ongc made two suggestions in the course of his argument. Firstly, he said that for purposes of conversion the rate of exchange fixed by the Umpire, i.e. Ff 1=1.5178. should be adopted for conversion of French francs into Indian rupees. This is not acceptable to Forasol. Forasol say: 'No. Indian rupee is no good to us. It has gone down much in value. If we accept it we would lose one half of the debt. Our 80 per cent fees are to be paid in French francs. We want French francs. We will accept no other.' They say that the rate of exchange prevailing on the date of the decree (May 7, 1975) should be adopted. On that date the rate was I F 1=rupee 1.938.

(23) Obviously the Umpire has fixed the rate of exchange of the 'rupee portion' of his award. He has not fixed any rate of exchange for French francs. Nor did the contract provide for the rate of exchange turn French francs. For the rupee portion of 20 per cent it provided a fixed rate of conversion which was uplifted, by the Umpire at the request of Forasol as the rupee had gone down in value. He took note of devaluation in his Umpirage. But as regards the payment in French francs the question has to be decided by the court when it arises in the course of the enforcement of the award as it has now arisen before me. From the award it appears to me that the rate of exchange Ff 1 = 1.5178 applies only to the 'rupee portion' and not to that part of the award which the Umpire made. in Fench francs relateable to 80 per cent of the currency of payment.

(24) The second suggestion was that the date of the award should be taken as the date of conversion. On that date the prevailing rate of exchange was Ff l=Rs. 1.831. Forasol do not agree even to this. They say that they are entitled to the rate of exchange on the dete of the decree (May 7, 1975). On that date Ff I was equal to 1.938. Which date should be adopted This is the question.

(25) The situation as regards currency stability has substantially changed ever since 1966. The main world currencies arc not stable. They go up and down. They have no fixed exchange value even from day to day. This state of facts has become recognised , those commercial circles which are closely concerned with international contracts. The reaction to them appears in the field of arbitration. Take this very case. There is an international commercial contract between a French firm and the ONGC. The Umpire has cxpressed his arbitrament in a foreign currency so far as 80 per cent payment to Forasol is concerned. The award involves 'foreign money obligations.' So far as 80 per cent payment is concerned Forasol have no concern with the Indian rupee; for them what matters is that a French franc, for good or ill, should remain a French franc. They insist on payment in French francs. They are clearly entitled to payment. of 80 per cent in French francs. Such is the term of their cngagcmcm.

(26) Ongc have the option to pay either a sum of foreign currency or its rupee equivalent at the date of the decree. But if they do not pay French francs, in execution proceedings it will be necessary to convert French francs in Indian rupees at the rate prevailing at the date of the decree.

(27) FORASO1 claim that they as the foreign creditor should get neither more nor less than what they bargained for. They claim that they must be paid the admitted sum of Ff 21,11,704.01. Whichever may the rate of exchange of the Indian currency may go they should get Ff 21,11,704.01. In other words their case is that they should be tendered Ff 21,11,704.01 in specie.

(28) Forasol are prepared to give credit for Rs. 10,19,380.39 on account of payment made on their behalf by Ongc to the income-tax authorities. This sum will have to be converted according to the rate directed by the Umpire, that is, Ff l=Rs. 1.5178. When so converted this comes to Ff 6,70,349.68. The amount of Ff 21.11.704.01 will have to be reduced by Ff 6,70,349.68. The result is that Ff 14,41,354.33 will remain due which are equivalent to Rs. 27.93,322 at the rate of exchange prevailing on May 7, 1975, the date of the decree (FF l=-Rs. 1.938).

(29) English and American judges have wrestled with the legal problems of foreign money in general, and the relevant date of conversion in particular. The date chosen is of great importance to the parties in view of the violent fluctuations in the rate of exchange that occur not infrequently in the commercial world. Old equilibrium has been upset. Perhaps it will never be restored. The foreign trader is baffled. How can he put his trust in a foreign currency? The search for a formula to deal with the situation becomes urgent in the interest of justice.

(30) More than 50 years ago Mr. Justice Holmes in an important judgment of the U.S. Supreme Court in Die Deutsche Bank Filiale Nurnberg v. Charles Franklin Humphrey, (1926) 272 U.S. 517 argued that the creditor must be given that number of marks to which he has been found to be entitled, irrespective of the rate of exchange. He said:

'WEmay assume that when the bank failed to pay on demand its liability was fixed at a certain number of marks both by the terms of the contract and by the German law-but we also assume that it was fixed in marks only, not at the extrinsic value that those marks then had in commodities or in the currency of another country. On the contrary. we repeat, it was and continued to be a liability in marks alone and was open to satisfaction by the payment of that number of marks, at any time, with whatever interest might have accrued, however much the mark might have fallen in value as compared with other things.'.

(31) In 1961 the House of Lords in United Railways of Havana and Regla Warehouses Ltd. (1961) Ac 1007(2) held that -breach date', that is, the date on which the cause of action arose, ought to be the date of conversion. Lord Denning was a party to this decision. In later years he changed his opinion. In The Teh Hu (1970) P 106, Jugoslavenska Oceanska v. Castle Investment Co. (1973) 3 All Er 498 and Schorsch Meier v. Hennin. (1975) 1 Qb 416, he championed the view that the breach date rule is unjust. It should no longer be adopted. He strongly pleaded for its overthrow. In cases of arbitration it should be the date of the award: See the case of Jugoslavenska Oceanska (supra).

(32) In Miliangos v. George Frank (Textiles) Ltd., (1975) 3 Wlr 758, the House of Lords has held that the crucial date should be the date of payment meaning 'the date when the court authorises enforcement of the judgment in sterling'. The date on which the action. was brought has not been accepted. Nor has the date of judgment found favor. There may elapse considerable interval of time between the conversion date and the date of payment. During that interval currency fluctuations might case the award or judgment to vary appreciably from the sum in foreign currency to which the creditor was entitled. The House of Lords thereforee held that in order to do complete justice to the parties it should be the date of payment in the sense I have mentioned above.

(33) The decision of the House of Lords in Miliangos v. George Frank (Textiles) Ltd., (supra) is a landmark in the Conflict of Laws. It is a striking example of judicial activism as it represents a progressive and reforming spirit in the field of international commerce which for many decades had been burdened by poorly reasoned precedent. This important decision marks the culmination of trail-blazing opinion expressed by Lord Denning in the Court of Appeal successively in three cases, sometimes alone in a dissenting voice and sometimes with other members of the Court of Appeal when they chorussed their agreement with his views. (See: The Teh Hu, (1970) P 106, Jugoslavenska Oceanska, (supra) and Schorsch Meier v. Henin (supra).

(34) As a result of Lord Denning's most beneficial initiative in the Court of Appeal it can now be said with some confidence that law has become responsive to the needs of the changing times.

(35) In the Miliangos case it was decided that an English Court could in the circumstances of that case gave judgment in a foreign currency and that no conversion into sterling was necessary until the time came for enforcing the judgment when the rate current at the date of enforcement should be applied.

(36) In that case the defendant, a buyer of goods, had failed to pay a debt expressed in Swiss francs in 1971, managed to stave off judgment until 1974, when the pound had sadly depreciated, and then argued that his liability was only to pay in pounds at the rate of exchange prevailing three years ago when he should have honoured his obligation. The action there appears to have been brought on the original consideration for the price of the goods sold, which was expressed in Swiss francs and was payable in Switzerland. The defendant had failed to meet the bills, which he had accepted. These also were in Swiss francs payable in Switzerland, where they were protested on dishonour.

(37) The House departed from the breach date rule for the purposes of conversion and reversed its previous decision in Re: United Railways of the Havana and Regla Warehouses Ltd., (1961) Ac 1007 on the ground that the basis for the rule having disappeared by reason of changing circumstances, the rule itself could no longer be held to exist. Miliangos' case laid down the principle that the ruling rate of exchange should be the date of enforcement of the judgment.

(38) It is of the greatest importance to examine this decision at some length. The reasoning of the House of Lords in Miliangos' case can be summarised under five main heads: 1. There were no procedural difficulties in the way of an English Court giving judgment in a foreign currency. English law has till recently been dominated by the principle stemming from the days of inviolate sterling, that a judgment will only be given in sterling. The judgment can now be given in England in foreign currency. 2. Currencies in these days were less stable than they used to be. Sterling and various other currencies had no fixed exchange value from day to day but 'floated'. 3. Commercial arbitrators in the city of London have for some time past freely expressed their awards in the appropriate foreign currency. Lord Wilberforce considered this development in relation to arbitral awards in a foreign currency as of great importance. 4. There had recently been a change in Admiralty practice as exemplified in The Halcyon the Great (1975) 1 Wlr 515(7), where an order was made in Admiralty for the sale of a ship in United States dollars and for lodgement of the price achieved by such sale in a separate dollar account. 5. Finally justice required that the creditor should not suffer by reason of the depreciation in sterling between the due date on which the debtor should have met his obligation's and the date on which the creditor was eventually to obtain judgment. As stated by Lord Wilberforce, the creditor-'has bargained for his own currency and only his own currency-The Creditor has no concern with pounds sterling; for him what matters is that a Swiss franc for good or ill should remain a Swiss franc', (p 709).

(39) The reasoning of the majority of the House of Lords (Lord Simon dissenting) in Miliangos' case applies with equal force to Forasol's claim in the present execution. I think it is clear when someone under an obligation to pay another a sum of money expressed in a foreign currency but to pay it in this country (India), the person under the obligation has an option, if he is to fulfill his obligation at the date when the money is payable, either to produce the appropriate amount in the foreign currency in question (French francs in this case) or to pay the equivalent in Indian rupees at the rate of exchange prevailing at the due date. This proposition, seems to be elementary and a matter of common sense. It is stated in Dicey and Morris on the Conflict of Laws (9th ed (1973) p. 903, -904. r 173) as follows:

'IFa sum of money expressed in a foreign currency is payable in England, it may be paid either in units of the money of account or in sterling at the rate of exchange at which units of the foreign legal tender can, on the day when the money is payable, be bought in London in a recognised and accessible market, irrespective of any official rate of exchange between that currency and sterling.'

(40) What is the crucial date of conversion of the Ff into the Indian rupee? The breach date rule (i.e. the date of the cause of action) has now authoritatively been rejected by the House of Lords. The date of enforcement of the judgment is the right date at which to convert a judgment in a foreign currency into Indian rupees. This will produce a just result.

(41) Where the obligation in the contract is expressed in terms entitling the creditor to a sum expressed in a foreign currency, judgment must, I repeat 'must', be given in that currency. (Barclays Bank Ltd. v. Lavin Bros Ltd., (1976) 3 All Er 900. If this is not done it will perpetrate serious injustice. Take this case. The rupee has fallen in value. Indian currency has depreciated. Forasol contracted to be paid in French francs. The creditor will receive unfairly a sum in Indian rupees when he comes to enforce his judgment far less in value than the comparable amount in Ff which in specie he had contracted to take. To avoid injustice the House of Lords departed from the breach date rule and adopted the enforcement date principle. We should do likewise.

(42) The famous decision in Miliangos has revolutionised the position. The House laid down a new rule: an English Court can and should give judgment in foreign currency where the claim is. for the satisfaction of 'obligation of a money character to pay foreign currency arising under a contract'. In the event of the judgment-debtor's failure to pay, the conversion date will be 'the date when the court authorities enforcement of the judgment in terms of sterling' (per Lord Wilber- force).

(43) The substance of the creditor's right is the right to be paid in foreign currency. He must get that number of marks which the judgment- debtor is found liable, as Helmes J. put it. Nothing more nothing less.

(44) In the present case the money of account and the money of payment are French francs at least so far as 80 per cent payment is concerned. That is the currency of the contract. The place of payment is Indian. But suppose Ongc cannot pay in French francs. The'' they must pay in Indian rupee so that they can be converted in FF. The ruling rate of exchange will be the date on which the judgment became enforceable i.e. the date of the decree. In other words the French francs have to be translated into Indian currency according to the rate of exchange prevailing on the date of the decree. I may however add that I have not adopted the date of levying of execution of the decree.

(45) Following the decision of the House of Lords in Miliangos v. Geo. Frank (Textiles) Ltd., (supra) I would hold that the date of conversion in this case should be May 7, 1975, the date when the court made the award a rule of the court and passed a decree in terms thereof under s. 17 of the Arbitration Act. Till then the award was not enforceable. After the award was impressed with the seal and authority of the court it became enforceable and on that date Forasol became entitled to French francs awarded to them. (I cannot) adopt the date of the award (December 21, 1974) as the date of conversion as under the Indian law the award without being embodied in a decree of the court is unenforceable. Without taking the procedure of s. 17 Arbitration Act a party cannot enforce an award under our system of law. English law is different. There awards can be enforced as judgments under s. 26 of the Arbitration Act. I have thereforee thought that the just date will be the date of the decree.

(46) Devaluation was an unforeseen event outside the contemplation of the parties. If Forasol had been asked 'What is to happen if the Indian rupee is devalued?' They would have at once said: Of course that will not affect the obligation of Ongc to pay us in French francs'. Suppose Ongc pay at the rate of Ff l=Rs. 1.5178. It would mean that Ongc will be taking advantage of their own wrong. They were in default. Now when it comes to payment, they would be paying in depreciated rupee. Their delay in payment would operate to their own advantage and to the loss of Forasol. This rule does injustice to the foreign trader. The House of Lords thereforee departed from this rule. They laid down the enforcement date rule. Lord Edmund-Davies said:

'......the most just rate would be that prevailing when the award was being enforced, for the plaintiff had been kept out of his money until then. ..... .'

(p. 802). As Lord Fraser said:

'.......there seems no reason why one should stop short of the latest practicable date, which seems to be the date when the court authorises enforcement of the judgment.'

(p. 803). Ongc have raised three other objection's which I must notice. Firstly, they claim interest on Rs. 10,19,380.39 which they paid on account of income-tax on behalf of Forasol. From the award it appears that this claim was made before the Umpire, He rejected it. At page 133 of the award he said:

'UNDERthe contract there is no right to interest to either party except on French Francs. If the amount paid by O.N.G.C. to the credit of Forasol in regard to Income-Tax and the several items of allowance and disallowance under this award are worked out and it is found that there is an amount payable to O.N.G.C. in French Francs that would carry interest, but if the amount is in Rupees then no interest would be allowed until the date of the award.'

(47) The amount claimed by Ongc is in rupees. The claim for interest was expressly rejected by the Umpire. No interest can thereforee be allowed on it as per the directions of the Umpire.

(48) Counsel for Ongc contends that they are entitled to interest as the sum of Rs. 10,19,380.39 is to be adjusted against the French Francs and thereforee it is a claim in French Francs and not in rupees. I cannot accept this submission. The verdict of the Umpire is clear. Ongc are not entitled to interest on Rs. 10,19,380.39. This is my finding.

(49) Secondly, Ongc claim Ff 340.36 on account of interest on Ff 3265.39. At page 157-C of the award it will be noticed that the Umpire found Forasol to be entitled to interest in the sum of Ff 12,91,290.06. From this he allowed the adjustment of Ff 3265.39 which was payable by Forasol to ONGC. After adjustment he held that Forasol were entitled to Ff 12,88,185.35 on account of interest. Interest is now sought to be claimed on Ff 3265.39 which already stands adjusted in the award of the Umpire. How can any claim of interest be made on an amount which already stands adjusted and paid so to speak

(50) Thirdly, Ongc claim that they arc entitled to what has been called as 'tax differential'. As regards income-tax the contract Between the parties provides as follows:

'ARTICLEIV. 1.2. Forasol shall pay income-tax, surcharge on income tax, and all other taxes which shall be assessed and levied by the Indian Income-tax authorities on the income of Forasol under this contract as well as on the income of FORASOL's personnel from the work performed by them under this contract, Provided that if there are any changes in the tax rates in India subsequent to the date of signature of this contract and as a result the total amount of taxes payable on the income of Forasol is higher than the amount which would have been payable on the basis of the rates in force on the date of signature of this contract, Ongc shall pay the difference to FORASOL. If, on the other hand, the changes in the tax rates are such that the total amount of taxes payable is less than the amount which would have been payable on the basis of the rates in force on the date of signature of this contract, 'FORASOL shall pay the difference to ONGC'. It is understood that this proviso shall not be applicable in respect of the taxes payable by Forasol on the income of its personnel.'

(51) The rate of tax prevailing at the time of the contract in 1964 was 63 per cent.

(52) Counsel for Ongc argues that they are liable to reimburse Forasol for the excess income-tax paid over the rate prevailing at the time of the contract. Similarly, he argued that they are entitled to reimbursement if the prevailing rate of income-tax is at any time lowered during the currency of the contract. The clause clearly entitles Ongc to claim the difference from Forasol if the tax rates are reduced. But this question no longer survives. All that Ongc did was this. They paid Rs. 10,19,380.39 on account of tax liability of Forasol. This amount they are entitled to recover from French Francs due to them. Forasol are agreeable to this. But after adjustment of Rs. 10,19,380.39 there is no question of any tax differential. The whole thing is over. Ongc do not come into the picture at all. The contract is over. Disputes have been settled by the Umpire. At page 151 of his award the Umpire dealt with this question.

(53) Counsel contends that if any refund is allowed to Forasol by the Income-tax authorities either in appeal or in revision which are still pending, Ongc should be entitled to the refund. I do. not agree Ongc have been paid by adjustment the entire amount of Rs. 10,19,280.39. If any refund is found to be due Forasol will get it and not ONGC. They are out of the picture now.

(54) On December 9, 1975 Ongc intimated Forasol that they have remitted a sum of Rs. 18,84,610 to the Income-tax Officer, Jaipur on account of income-tax liability of Forasol. Credit for this amount has been given in the execution petition to ONGC. What remains If Forasol succeed in appeal before the Income-tax authorities they are entitled to refund and not ONGC. This is clear on facts.

(55) I, thereforee, hold that Forasol are entitled to Rs. 11,10,780 as claimed by them in their execution petition and interest from the date of the execution petition (October 8, 1976) till payment at the rate of 6 per cent. Ongc can satisfy the judgment-debt by paying the French Francs or, if they prefer, they can satisfy it by paying the equivalent sum in rupees, that is equivalent at the time of the passing of the decree. That for all purposes is the judgment date. The rate of exchange will be the rate ruling at the date of the decree.

(56) I gather that in this case it is not desired to levy execution but simply to have an authoritative impress of the court on the amounts due under the award to the parties. I have held that Forasol are entitled to Rs. 11.10,780 and further interest. If the amount is not paid within two weeks attachment shall issue against the property and effects of ONGC.


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